Asia's stock market reacts calmly to Fitch's rating of China

Unfazed by a Fitch rating cut to China, which sparked a little local sell-off as the world's second-biggest economy tries to create a strong post-COVID rebound, Asian equities moved higher on Wednesday.

Benchmark 10-year Treasury note yields were at 4.3556% as of Tuesday's U.S. closing of 4.366%. In contrast to the U.S. closing of 4.747%, the two-year yield, which rises in line with traders' predictions of increasing Fed fund rates, hit 4.7384%.

Fitch maintained its 'A+' sovereign rating for China despite a lowered outlook and a predicted slowdown in economic growth this year.

"These downgrades are not forward-looking; rather, they mostly reflect China's current cyclical circumstances. This implies that they would adjust their rating outlook to positive if and when China's economy strengthens, according to senior strategist Chi Lo of BNP Paribas Asset Management. He said that Fitch's action came after a comparable request made by Moody's in December.

The Nikkei stock index in Japan fell by 0.55%, while Australian equities had a 0.3% increase. The decline in the value of the yen is expected to support the Nikkei's goal of testing 40,000 points once more.

But more depreciation of the Japanese yen would force authorities to step in, particularly if it breaches 152 against the US dollar. However, economists predicted that any intervention measures would not cause the yen to appreciate much.

Investors will keep a careful eye on U.S. consumer pricing data that is scheduled for release on Wednesday in order to determine the direction of the next interest rate rise. It is anticipated that the report will demonstrate an increase in headline inflation from 3.2% in February to 3.4% annually.

Financial markets are already considering the possibility of a June interest rate decrease in the United States, with the central bank's next action expected to be determined by the inflation number.

(Sources: investing.com, reuters,com)