- Asian equities have corrected significantly amid escalating geopolitical tensions.
- The DXY has been strengthened post the upbeat Retail Sales data.
- Accelerating Covid-19 cases in China have impacted oil prices significantly.
Markets in the Asian domain are facing an intense sell-off amid mounting tensions between North Korea and the US. Rising drills by the US army along with South Korea and Japan in the Kim Jong-un region have received a fierce response. In the Asian session, North Korea warned on Thursday of “fiercer military responses” to U.S. efforts to boost its security presence in the region with its allies, says Reuters.
This has strengthened the risk-off mood in the global markets and risk-perceived currencies are facing severe heat.
At the press time, Japan’s Nikkei225 dropped 0.40%, ChinaA50 plunged 1.65%, Hang Seng nosedived 2.56%, and Nifty50 eased 0.23%.
In addition to the cautious market mood, a release of better-than-projected US Retail Sales data has also supported the US dollar index (DXY). The economic data rose by 1.3% in October against the projections of 0.9% and flat performance in September. Despite higher payouts after adjusting for inflation impact, consumer demand has been ‘resilience’ due to higher dependency on credit card borrowing.
Analysts at Wells Fargo are of the view that robust consumer demand gives businesses no incentive to forgo price increases, thereby making the task of getting inflation in check more difficult for Federal Reserve policymakers.”
Meanwhile, sky-rocketing Covid-19 cases in China have dampened the market mood. The optimism derived from easing curbs has faded dramatically. Also, Gita Gopinath, the first Deputy Managing Director of the International Monetary Fund (IMF), at the Caixin Summit, cited that “Calibrating China’s zero-COVID strategy to mitigate the country’s economic impact will be critical to sustain and balance the recovery,”
On the oil front, rising numbers of Covid-19 infections have also weakened oil prices. It is worth noting that China is a leading importer of oil and weaker demand projections from the dragon economy are sufficient to impact oil prices.
Read More: Indices face turbulence as market mood sours, oil bleed