Asian Stocks Fall as Markets Second-Guess Fed Rate Cuts, China Growth Concerns Weigh
Most Asian stocks fell on Wednesday, tracking steep overnight losses on Wall Street as markets second-guessed expectations for early interest rate cuts by the Federal Reserve. This comes as concerns over slowing growth in China remain in play, following weak official purchasing managers index readings released earlier this week. The Chinese government also recently downgraded its gross domestic product figure for 2022, which could herald a weak reading for 2023.
China’s Shanghai Shenzhen CSI 300 fell 0.2% and remained close to a five-year low, while the Shanghai Composite index traded sideways. Broader Asian stocks also fell, with the technology sector seeing the heaviest losses following a rout in US majors. Tech-heavy indexes were the worst performers in Asia, with South Korea’s KOSPI sliding 1.7% and Hong Kong’s Hang Seng index shedding 1.1%.
Losses in major Apple Inc. suppliers also weighed on Asian bourses, after Barclays downgraded the iPhone maker citing a looming slowdown in device sales. Tech stocks were also pressured by anticipation of the minutes of the Fed’s December meeting, which were due later on Wednesday.
While the central bank had signaled rate cuts in 2024, it had given scant cues on the timing of said cuts. Fed officials also recently warned that expectations for early rate cuts were overly optimistic, given that inflation and the labor market were still running hot. Expectations of early interest rate cuts had driven strong gains in global stock markets through December, but this also made stock markets vulnerable to a sharp pullback on any doubts over the early rate cuts.
Markets were also awaiting key nonfarm payrolls data this week, which is expected to show some cooling in the labor space. But markets remained on edge over a stronger reading, given that payrolls almost consistently beat expectations through most of 2023. Analysts at ING wrote in a note that the Fed’s FOMC minutes due on Wednesday are unlikely to be as racy as Chair Powell was at the press conference.
Broader Asian markets tracked weakness in Wall Street, with Australia’s ASX 200 sinking 1% from a 2-½ year high. Futures for India’s Nifty 50 index pointed to a weak open, with the index likely to see more profit-taking after logging stellar gains in 2023. Japanese markets were closed for a week-long holiday, but futures for the Nikkei 225 index rose 0.4%.
Asian stocks fell on Wednesday as markets second-guessed expectations for early interest rate cuts by the Federal Reserve and concerns over slowing growth in China remained in play. Tech-heavy indexes were the worst performers in Asia, with major Apple Inc. suppliers also weighing on Asian bourses.
