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Declines gradually as risk rises, oil weakens, PMI takes focus

by SuperiorInvest
  • Asian indices fell for the second straight time after negative cues from the S&P500.
  • The BOJ’s interventions in currency markets confused investors’ approach to Japanese indices.
  • Global PMIs will remain muted due to tight monetary policy measures.

Markets in the Asian domain underperformed for a second straight day as the S&P500 goes through severe pain. US stocks, especially IT supplies are facing intense selling pressure as the Federal Reserve’s (Fed) rate hike on Wednesday raised the risk of a stagnant global economic growth rate.

At press time, Japan’s Nikkei225 had given up 0.58%, the ChinaA50 was down 0.30% and the Hang Seng was down 0.33%. In the Asia-Pacific region, the S&P/ASX200 fell more than 2% and the New Zealand DJ fell 1.77%.

Achieving the price stability agenda in the US economy results in a stark drop in growth projections and ultimately job creation. The housing sector becomes the main victim of higher interest rates lead to higher monthly payments that force them to postpone their home buying plans.

Japanese stocks are not doing well as the Bank of Japan’s (BOJ) intervention in currency markets has kept the bulls on their toes. The prolonged depreciation of the yen forced the BOJ to intervene in FX movements as the deprivation did not justify the fundamentals. The move came after the BOJ left the key interest rate unchanged despite accelerating price pressures. COMBAT Governor Haruhiko Kuroda believes the economy needs more monetary easing to cushion the impact of the Covid-19 pandemic.

On the oil front, oil prices are expected to hit the $80.00 round support earlier. Falling demand for gasoline in the US economy and continued interest rate hikes by Western central banks are resulting in lower demand for oil.

Going forward, the release of global S&P PMI numbers by various G-7 countries including Germany, the US and the UK will keep investors busy. Economic activity in August was affected by supply chain issues, the energy crisis and inflationary pressures. Therefore, economic data it is expected to remain vulnerable.

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