Asian Stock Market: China defends bulls ahead of Fed Chair Powell’s power-play

• Asian equities trade mixed, mostly edging higher of late.
• PBOC, US–China headlines back the bulls and so do NZ lockdown news.
• Pre-Fed caution, Afghanistan challenge market sentiment amid a light calendar.

Asian shares consolidate the previous day’s losses during early Friday as Beijing backs the bulls before the key Jackson Hole Symposium speech by Fed Chair Jerome Powell.

That said, MSCI’s index of Asia–Pacific shares outside Japan rises 0.30% whereas Japan’s Nikkei 225 drops 0.50% by the press time.

The People’s Bank Of China (PBOC) injects the most cash on a weekly basis in seven months, also teases rate cut, to recall the bulls. Risk appetite also improves after China’s Commerce Ministry said, “Economic and trade teams from China and the US have maintained normal communication.”

Elsewhere, tailor-made extended lockdown in New Zealand, as well as the receding virus infections in Australia and a bit in the West, also underpin the cautious optimism.

It’s worth noting that the latest Fedspeak has been hawkish and challenge the positive mood ahead of the important event. Among the Fed hawks was Dallas Fed President Robert Kaplan who said, “Fed's asset purchases had their purpose and their time but not longer well-suited to the situation.” James Bullard and Ester George were the rest of the non-voting Fed members who followed Kaplan and firmed up concerns over tapering.

On a different, a blast at Kabul airport and reports of two or three US officials being hurt raised worries of the US response to the Taliban. In response to the same, US President Joe Biden held militant group ISIS responsible for the attack and showed readiness to respond, easing pressure off Taliban­–US ties and adding to the risk-on mood.

Amid these plays, markets in Australia remain directionless whereas those from New Zealand print mild gains. Hong Kong and Taiwan follow Beijing to stay up but South Korea and Indonesia fail to keep the ball rolling. Furthermore, India tracks Australia while showing a lack of clear trend.

Further, S&P 500 Futures reverse early Asian losses, up 0.20% by the press time, whereas the US 10-year Treasury yields remain pressured around 1.34% at the latest. Furthermore, the US Dollar Index (DXY) also struggles to extend Thursday’s recovery moves, down 0.09% near 92.98.

Given the recently positive catalysts from Asia–Pacific, Powell’s ability to defend the Fed’s easy-money policy should be well-received by the bulls, if matched market consensus.

Read: Fed Chair Powell’s Jackson Hole Speech: Caution will win out