Asian Stock Market: Trades mixed amid China tech gains, recession risk

• Asian equities part ways from Wall Street as China allows bears to take a breather.
• 40-year high US inflation propelled hawkish Fed bets, economic slowdown fears.
• Aussie jobs report, inflation expectations favor hawkish RBA rate hike calls.

Asia-Pacific traders struggle to gain traction amid mixed concerns as China tries to renew optimism while updates from the West hint at recession. Strong inflation, hawkish bets on the key central banks and yield curve inversion are an extra burden to the market sentiment even if Beijing struggles to defend bulls.

While portraying the mood, the MSCI’s index of Asia-Pacific shares ex-Japan prints 0.20% intraday gains while staying around the two-year low hit on Tuesday. Further, Japan’s Nikkei 225 rises 0.70% to 26,665 heading into Thursday’s European session.

Elsewhere, “China's blue-chip index CSI300 rose 0.5% by the lunch break, while the Shanghai Composite Index gained 0.3%. In Hong Kong, the benchmark Hang Seng Index rose 0.2%,” said Reuters. The news also adds, “The markets are lifted by a surge in tech shares, as investors brushed aside overnight losses on Wall Street after 40-year-high U.S. inflation data fuels bets on faster U.S. monetary policy tightening.”

It should be noted that Australia’s ASX 200 rises over 1.0% even as Aussie employment and inflation numbers propelled the expectations of aggressive rate hikes from the Reserve Bank of Australia (RBA).

Australia’s Employment Change rose to 88.4K versus 25K expected and 60.6K prior. Further, the Unemployment Rate dropped to 3.5% from 3.9% previous readouts and 3.8% market consensus. Earlier in the day, Australia’s Consumer Inflation Expectations for July came out as 6.3% versus 5.9% expected and 6.7% prior. Following the data, Bloomberg said, “The result spurred traders to start pricing in a 75-basis-point rate hike for August by the Reserve Bank of Australia, with bets rising to 47% from no chance before the data.”

That said, stocks in India and New Zealand track gains from China while markets in the Philippines print losses amid hopes of more covid-linked pain.

On a broader front, the Bank of Canada’s (BOC) 100 basis points (bps) rate hike joined the 40-year high US Consumer Price Index (CPI) to propel the hawkish Fed bets. Reuters cites CME data to mention the hawks while saying, “They are now pricing in a nearly 80% probability of a full percentage-point rise at the coming meeting, according to an analysis of the contracts by CME Group.”

It should be noted that the US 10-year Treasury yields rose three basis points (bps) to 2.95% at the latest while the S&P 500 Futures drop 0.10% to portray the risk-off mood by the press time. More importantly, the spread between the 2-year US Treasury yields and its 10-year counterpart widens and portrays the market’s fears of economic slowdown. The yield curve inversion, the condition of higher short-term rates, hints at the investors’ rush for risk safety.

Moving on, risk catalysts and the US Producer Price Index (PPI) for June may entertain intraday traders.