Asian Stock Market: Recession fears weigh on sentiment, China cheers PBOC inaction

• Asian equities trade mixed with China bucking the bearish mood as PBOC holds benchmark rates unchanged
• Hawkish Fedspeak, central banks hint at global economic slowdown.
• Juneteenth holiday restricts market moves, US PMIs, Fed’s Powell eyed for clear directions.

Asia-Pacific shares struggle to justify a clear trend as markets fear economic slowdown and faster/heavier rate hikes amid a sluggish start to the week, after a super volatile one. However, traders in China appear cautiously optimistic as the key data/events loom. While portraying the mood, the MSCI’s index of Asia-Pacific shares ex-Japan drops 0.25% whereas Japan’s Nikkei 225 index falls 1.15% intraday heading into the European session.

The People's Bank of China (PBOC) kept its key monetary policy rates, namely the 5-year and 1-year Loan Prime Rate (LPRs) unchanged at 4.45% and 3.70% respectively during Monday's announcement.

The Chinese central bank’s inaction contrasts with the Western policymakers' hawkish bias but failed to underpin the markets in Australia, despite having strong trade ties, as a slump in iron ore weigh on Aussie equities, down 0.50% intraday by the press time. It’s worth noting that mixed covid updates from China’s Beijing, Shanghai and Shenzen also challenge the Aussie bulls from cheering PBOC’s status-quo. However, stocks in New Zealand remain mildly bid on upbeat Business NZ PSI for May, 55.2 versus 52.2 prior.

Elsewhere, Indonesia and South Korea remain on the back foot as fears of recession spread across the Asian region. Further, India’s BSE Sensex drop half a percent as traders expect a quarter percent rate hike from the Reserve Bank of India (RBI) despite the recently easy retail inflation data.

On a broader front, the S&P 500 Futures rise 0.35% intraday to 3,690, keeping Friday’s corrective pullback from the yearly low. It’s worth noting that the US 10-year Treasury yields remain static near 3.23% amid holidays in the US.

Also read: S&P 500 Futures stay pressured amid recession, Fed concerns on Juneteenth holiday

Looking forward, ECB President Christine Lagarde is up for testimony and may entertain markets amid the US off. However, major attention will be given to the preliminary readings of the US activity numbers for June and Fed Chair Jerome Powell’s testimony.