Asian Stocks Extend Declines on Fed Rate Cut Uncertainty
Asian stocks continued their downward trajectory on Thursday, as doubts over the timing and scale of the Federal Reserve’s interest rate cuts weighed on investor sentiment. Following a weak start to the year, regional markets took cues from Wall Street, which saw U.S. stock benchmarks fall for a second straight session. Investors remained cautious and opted to lock in profits after the tremendous gains seen in December.
Japan’s Index Takes a Hit After Earthquake Disaster
Japan’s market index was the worst performer in Asia, losing 1.2% in catch-up trade after an extended new year’s holiday. The sentiment towards Japan was further rattled by a devastating earthquake earlier this week, which resulted in the loss of many lives and widespread disruption in central Japan. Additionally, the Purchasing Managers’ Index (PMI) data revealed that Japanese manufacturing activity remained in contraction in December. These factors combined to create a negative environment for Japanese stocks.
Tech-Heavy Indexes Fall as Rate Cut Timing Remains Uncertain
Technology-heavy indexes in Asia experienced significant losses as the uncertainty surrounding the timing of the Federal Reserve’s potential interest rate cuts persisted. The South Korean stock market fell 0.9% and Hong Kong’s index shed 0.4%. The minutes from the latest Federal Reserve meeting showed central bank officials acknowledging progress against inflation but provided few indications of when interest rates might be trimmed. The lack of clarity prompted profit-taking in the technology sector, which had surged in anticipation of rate cuts earlier.
Broader Asian Stocks Continue to Slide, Australia in Contraction
The broader Asian stock market saw a continued decline, with Australia’s market falling 0.3% and further retracing from its recent 2-1/2-year high. The PMI data revealed that Australia’s manufacturing activity remained in contraction throughout December. Meanwhile, India’s stock market futures indicated a weak open, as the index was due for further profit-taking following a series of record highs in December. Additionally, PMI data showed that India’s economy grew less than expected in December, which contributed to the cautious sentiment.
Chinese Stocks Lag as Services Sector Growth Fails to Boost Confidence
Chinese stocks continued to underperform in comparison to their Asian peers, despite a positive private survey indicating growth in the services sector. The blue-chip index fell 1.1% and remained close to a five-year low, while the index experienced a 0.7% loss. The survey data suggested that China’s service sector had grown more than expected in December. However, concerns remained about the country’s economic recovery, especially considering the slower growth in the manufacturing sector, which makes up a significant portion of the Chinese economy. Official data released earlier this week painted a weaker economic picture compared to the private survey.
Analyst comment
1. Asian Stocks Extend Declines on Fed Rate Cut Uncertainty: Negative news. The market is expected to continue to decline as uncertainty surrounding the timing and scale of the Federal Reserve’s interest rate cuts weigh on investor sentiment.
2. Japan’s Index Takes a Hit After Earthquake Disaster: Negative news. The market is expected to face further losses due to the devastating earthquake, ongoing contraction in manufacturing, and negative sentiment towards Japan.
3. Tech-Heavy Indexes Fall as Rate Cut Timing Remains Uncertain: Negative news. Technology-heavy indexes are expected to experience significant losses due to the uncertainty surrounding the timing of the Federal Reserve’s potential interest rate cuts.
4. Broader Asian Stocks Continue to Slide, Australia in Contraction: Negative news. The broader Asian stock market is expected to see further declines, with Australia’s market falling and cautious sentiment towards India contributing to market retracement.
5. Chinese Stocks Lag as Services Sector Growth Fails to Boost Confidence: Negative news. Chinese stocks are expected to underperform due to concerns about the country’s economic recovery, slower growth in the manufacturing sector, and weaker official economic data.
