Asia’s major stock indexes slipped into the red on Tuesday as fading hopes of a US interest rates U-turn any time soon and pessimism over China’s recovery spread an air of gloom across trading floors.
Shares across the region hit a one-month low, US stock futures fell and the dollar rose after hawkish remarks from central bankers tempered expectations for long-awaited rate cuts.
Japan’s Nikkei slipped, snapping a six-day winning streak that had pushed the index to 34-year highs. The share average fell 0.79%, or 282.61 points, to close at 35,619.18, while the broader Topix was down 0.82%, or 20.62 points, to 2,503.98.
The market was hitting irrational levels, said Kyle Rodda, senior financial market analyst at Capital.com. “We are due for a correction,” he said.
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China and Hong Kong stocks were mixed as investors exercised caution ahead of the release of China’s annual economic growth data on Wednesday. December activity data scheduled to be released at the same time is also in focus to see if the economy gained momentum heading into 2024.
China’s blue-chip CSI300 Index gained 0.61%, while the Shanghai Composite Index rose 0.27%, or 7.70 points, to 2,893.99. But the Shenzhen Composite Index on China’s second exchange edged back 0.03%, or 0.56 points, to 1,743.02.
Tourism stocks have been one of the few bright spots among Chinese equities, rising 1.5%. Changbai Mountain Tourism rallied 10%.
Hong Kong’s benchmark Hang Seng Index was down, hitting its lowest level since November 2022. The Hang Seng Index dropped 2.16%, or 350.41 points, to 15,865.92. Tech shares slumped 2.3%.
Elsewhere across the region, in earlier trade, there were also losses in Sydney, Seoul, Singapore, Bangkok, Mumbai, Wellington, Taipei and Manila. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4% to its lowest since mid-December.
US markets were shut for a holiday on Monday, but S&P 500 futures were 0.5% lower in Asia trade on Tuesday and Nasdaq 100 futures dropped 0.6%. European futures fell 0.6% and FTSE futures fell 0.3%.
Fed funds futures also dropped notably for Asia hours, reflecting a slight cooling in interest rate cut expectations, and short-term Treasury yields rose.
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Two-year yields were last up 7 basis points and tugged the dollar to one-month highs on the risk-sensitive Australian and New Zealand dollars.
On Monday, European bonds were sold after European Central Bank officials pushed back on market bets on rate cuts.
A stronger dollar pushed the euro about 0.3% lower to a one-week trough on the greenback at $1.0913 on Tuesday.
Donald Trump secured a resounding victory in the first 2024 Republican presidential contest in Iowa on Monday. His candidacy is likely to stir volatility in markets.
Federal Reserve Board Governor Waller’s speech on the economic outlook at 1600 GMT, meanwhile, is also to be closely watched since markets had so heartily cheered a shift in his hawkish views in November, when he laid out a path to cuts.
Houthi forces in Yemen struck a US-owned and operated dry bulk ship with an anti-ship ballistic missile on Monday though oil, which has been supported by the instability in the shipping lane, gave no immediate reaction. Brent crude futures were steady at $78.10 a barrel.
Key figures
Tokyo – Nikkei 225 < DOWN 0.79% at 35,619.18 (close)
Hong Kong – Hang Seng Index < DOWN 2.16% at 15,865.92 (close)
Shanghai – Composite > UP 0.27% at 2,893.99 (close)
London – FTSE 100 < DOWN 0.43% at 7,562.27 (0934 GMT)
New York – Dow < DOWN 0.31% at 37,592.98 (Friday close)
- Reuters with additional editing by Sean O’Meara
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