Asian equities are mixed on Tuesday as investors weighing Beijing’s stance in supporting the economy and the Federal Reserves clue on policy tightening.
Equities in Mainland China and Hong Kong dipped moderately while South Korea and Japan inched higher marginally. The MSCI Broad Market Asian Index ex Japan dipped by 0.74%.
Traders are awaiting for the release of Chinese loan prime rates on Wednesday after the People’s Bank of China reduced the reserve requirement ratio for most banks Friday but refrained from cutting interest rates.
“The unwillingness to loosen monetary policy further before Covid is under control means that market sentiment will probably remain bleak in coming weeks,” the Gavekal Dragonomics team wrote in a note Monday.
“However, equities will rally even harder if lockdowns lift and policymakers start to make up for lost growth with additional easing measures.”
Supply chain disruptions from China’s lockdown along with impact from the war keep an upward pressure on prices. The World Bank cut its forecast for global economic expansion this year on Russia’s invasion of Ukraine.
U.S. treasuries yields dipped along long term yardsticks dropped on Monday. Fed President of St. Louis -James Bullard said the increase of 75 basis points while not the base case shouldn’t be routed out as the central bank needs to move quickly to combat inflation.
The dollar gauge advanced while the yen is in the midst of the longest losing streak in at least half a century.
“Yield spikes have often spelled trouble for stocks, but we believe the past is an imperfect guide in a world shaped by supply shocks,” BlackRock Investment Institute strategists led by Wei Li, global chief investment strategist, said in a note.
“We see central banks normalizing quickly – but not slamming the brakes on the economy. This should keep real yields low and underpin equity valuations.”
On Russia-Ukraine war front, Ukrainian President Volodymyr Zelenskiy said Monday that Russian forces had begun the campaign to conquer the Donbas region in Ukraine’s east as Moscow continues moving troops and material into that part of the country.
Crude oil inched up with the WTI trading around $108 a barrel while the Brent is trading around $113 a barrel.