Traders scramble to cheer China, IMF news, softer oil price amid mixed details

• Equity trading in Asia Pacific has been mixed and has been falling lately as traders remain cautious awaiting major data/events.
• Upbeat Chinese PMI, IMF growth forecasts join Covid-related headlines to support bullish bias.
• Mixed concerns about China due to disappointing industrial earnings, sour sentiment in India and aggressive talks with the BoJ are questioning equity buyers.
• S&P 500 Futures are hesitant to extend Wall Street’s losses in hopes of economic recovery.

Markets in Asia are not welcoming the positive signals from China and the International Monetary Fund (IMF) as sentiment remains cautious ahead of key data and central bank meetings. Market turmoil could be exacerbated by recent firmer US data and looming economic fears around Asia.

Amid these moves, the MSCI index of Asia-Pacific stocks outside Japan is tracking Wall Street’s losses as it posts daily 1.20% down, while Japan’s Nikkei 225 is down 0.25% by press time to 27,375. In addition, Japanese stocks can’t welcome the mostly upbeat data out of Tokyo, as well as risk-positive news about the coronavirus and emerging market growth, amid fears of aggressive moves from the Bank of Japan (BoJ).

Japan’s unemployment rate remains unchanged near 2.5% in December, but retail sales rose past 0.5% to 1.1% during the said month, according to market forecasts. Along the same line, industrial production also exceeded the -1.2% consensus by -0.1% for December.

On the other hand, Chinese stocks are gnawing higher as the NBS Manufacturing PMI rose to 50.1 versus 49.7 market forecast and 47.0 previously, while the Non-Manufacturing PMI was also bullish at 54.4 compared to 51.0 expected and 41.6 previous readings. Still, the country’s industrial profit contract is contracting in 2022.

Elsewhere, the International Monetary Fund (IMF) recently raised its estimates for global growth, saying the emerging market slowdown had bottomed out in 2022. helped by “surprisingly resilient” demand in the United States and Europe, a reduction in energy costs and the reopening of China’s economy after Beijing loosened its strict COVID-19 restrictions. It is worth noting that the IMF’s fear of inflation appears to be weighing on market sentiment.

Earlier preference for the risk profile could be the news suggesting that US President Joe Biden’s willingness to withdraw the Covid-led emergency from May 11 seems to have favored the risk profile as of late. On Monday, China’s Center for Disease Control and Prevention (CDC), reported by Reuters, said “China’s current wave of COVID-19 infections is nearing an end, and there was no significant recovery in cases over the Lunar New Year holiday.”

Aside from the risk catalysts, the gloomy oil prices also put a floor under Asia-Pacific stocks. That said, WTI crude oil is printing a three-day downtrend near $78.00 at the time of writing. Along the same lines, US equities and S&P 500 Futures could be offered mildly.

On the other hand, fears of equity losses in India following the Adani Enterprise fiasco and hopes of the lowest growth in three years seem to be putting downward pressure on Indian equities. In addition, gloomy Aussie Retail Sales and growth fears in China are holding stocks in Australia and New Zealand aside.

Ahead, traders in the Asia-Pacific region will want to keep a close eye on India’s Union budget for fiscal year 2023-24 and New Zealand’s quarterly employment data for any immediate clues. However, the Fed’s judgment is key to clear guidance.