Asian Stock Market: US debt-ceiling bill approval and Fed’s neutral commentary uplift market mood

Markets in the Asian domain posted significant gains on Friday. Rally in Asian indices is being supported by the clear passage of the US debt-ceiling  |  02/06/2023 06:02

• Asian indices are having a ball as a clear passage of US debt-ceiling bill through Congress has uplifted market mood.
• BoJ Ueda said that the monetary policy will remain accommodative as the economy will take some time to reach the 2% price goal.
• A surprise expansion in China’s domestic factory activity supported Chinese equities.

Markets in the Asian domain posted significant gains on Friday. Rally in Asian indices is being supported by the clear passage of the US debt-ceiling bill and favor for a pause in the policy-tightening spell by a few Federal Reserve policymakers. Asian majors are following the footprints of the S&P500 as the latter settled with significant gains on Thursday.

The US Dollar Index (DXY) is struggling to show promising recovery signals after a perpendicular sell-off post dovish commentary from Fed policymakers. Fed Governor Philip Jefferson said in a speech on Wednesday that pausing rate hikes at the next FOMC meeting would offer time to analyze more data before making a decision about the extent of additional tightening. He added that a pause does not mean that rates peaked.

At the press time, Japan’s Nikkei225 jumped 0.94%, ChinaA50 soared 1.46%, Hang Seng gallops 3.45%, and Nifty50 remains subdued.

Japanese equities are skyrocketing as Bank of Japan (BoJ) Governor Kazuo Ueda said in front of Parliament that the monetary policy will remain accommodative as the economy will take some time to reach the 2% price goal. The continuation of the ultra-dovish monetary policy is a boon for stocks as sufficient injection of liquidity into the economy would allow firms to remain handy with funds for augmenting fixed and working capital requirements.

Chinese stocks have recovered sharply as investors are confident that the economy is effectively on the path of recovery after the release of the Caixin Manufacturing PMI data. Domestic factory activity remained upbeat in May as the economic data jumped to 50.9, higher than the consensus and the prior release of 49.5. A figure above the 50.0 threshold is considered an expansion in economic activities.

The Indian market is getting volatile as investors have shifted their focus toward the interest rate decision by the Reserve Bank of India (RBI), which will release next week. A survey from Bloomberg showed that the RBI will keep its repo rate steady at 6.5% throughout the year and will announce a rate cut by 25 basis points (bps) in the first quarter of the next financial year.

On the oil front, oil prices have shown recovery after defending the crucial support of $70.00 amid expectations that OPEC+ would announce production cuts in its meeting scheduled for June 04 to provide support to lower energy prices.