Rebounds strongly as investors ignore US inflation fears

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  • Asian stocks rebounded as DXY posted lackluster performance ahead of the US inflation release.
  • Chinese indices outperform as the United States lowers some tariffs imposed on Chinese imports.
  • Oil prices fell below the $100.00 mark on rising demand concerns.

Asian domain markets saw a decent reversal after a series of bearish trading sessions. This came after investors shrugged off concern over the US inflation release. The easing of uncertainty in Asian markets was also accompanied by a drop in oil prices, which prompted reactive buying action on Wednesday.

At press time, Japan’s Nikkie225 gained 0.30%, India’s Nifty50 gained 0.25%, Hang Seng jumped 1.50%, and China’s SZSE component jumped 2.86%.

A strong rebound in Chinese indices was supported by the announcement of the tariff withdrawal on Chinese imports by the United States. US President Joe Biden announced on Tuesday that the administration could impose some of the tariffs against Chinese imports to reduce inflation. Meanwhile, China’s annual inflation landed at 2.1%, above the forecast of 1.7%. In addition, the producer price index (PPI) remained above 8% against estimates of 7.7%.

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Meanwhile, the US Dollar Index (DXY) struggled to break above the resistance at the 104.00 round levels. The DXY is trading lackluster as investors sidelined ahead of the US inflation release. US annual inflation is expected to land at 8.1% while core CPI could come in at 6%.

On the oil front, the growing odds of a 75 basis point (bp) interest rate hike by the Federal Reserve (Fed) heightened demand concerns. Aggregate demand could fall due to shrinking liquidity in the economy. Easy money will come out and the labor market could be hit hard. This caused Oil prices to fall below the psychological support of $100.00. Lower oil prices are a boon for Asian economies as they are major importers of fossil fuels.

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