Bears keep reins despite BOJ inaction, RBI hopes

  • Asian stocks remain under pressure despite efforts by Asian central banks to keep investors hopeful.
  • The BOJ kept its monetary policy intact but the FX reference is weighing on sentiment in Japan.
  • RBI suggests India’s economy should improve despite the risk to global growth.
  • The WTO trade deals are also failing to impress bulls amid the hawkish game of Western central bankers.

Asian markets are following Wall Street’s losses, despite mildly positive catalysts at home, as investors remain worried about the future economic outlook amid aggressive central bank actions in the west.

That said, the MSCI Asia-Pacific ex-Japan equity index remains under pressure around the monthly low, down 0.50% intraday near 647.00 as of Friday morning press time in Asia. The Japanese Nikkei, on the same line, fell around 1.5% even as the Bank of Japan (BOJ) left its monetary policy unchanged despite inflation fears and a weaker yen.

India’s BSE Sensex is also following the MSCI gauge, with intraday losses around 0.50% latest, even as the Reserve Bank of India cited hopes of economic recovery in its monthly bulletin. “Gross Domestic Product (GDP) for 2021-22 is 1.5% above its pre-pandemic level (2019-20) and activity is strengthening in 2022-23 on high-frequency indicators “, said the RBI monthly bulletin on Thursday. “Domestic economic activity has gained ground despite formidable headwinds from external developments,” added the Indian central bank.

It should be noted that China’s woes and readiness for mass testing join hopes for further stimulus to challenge the bears. Even so, Hong Kong and Shanghai stocks are posting small losses at press time.

Stocks in Australia and New Zealand fall the most as market participants brace for aggressive rate hikes from the Reserve Bank of New Zealand (RBNZ) and the Reserve Bank of Australia (RBA), particularly in following the latest hawkish moves by the Fed, BOE and SNB.

Elsewhere, Indonesian stocks also remain in red palm oil prices pointing to the biggest weekly drop in six.

Aside from individual catalysts, slightly priced S&P 500 futures, weaker yields and news from the World Trade Organization (WTO) also failed to revive optimism in Asia. Reuters carried the WTO News saying: “Representatives from 164 countries cheered after the package was adopted before Director-General Ngozi Okonjo-Iweala addressed them early on Friday.”

Looking ahead, a speech from BOJ Governor Haruhiko Kuroda and Fed Chairman Jerome Powell will be crucial to watch for clear guidance.

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