On Tuesday, most Asian stocks witnessed a decline, with Japan’s Nikkei 225 experiencing a pullback as investors opted to secure profits following an impressive rally. The focus has now shifted to crucial upcoming economic indicators from China.
The absence of trading cues from the U.S. market due to a holiday left regional markets with limited immediate direction. However, lingering concerns about a potential escalation in military action in the Middle East kept risk appetite delicate.
Despite a six-day rally, the Nikkei 225 slipped by 0.4%, retracing from its recent highs not seen since the unwinding of a massive speculative bubble in the 1990s. The index, however, remained comfortably above 35,500 points, with analysts speculating that the rally might have further potential.
Data released on Tuesday revealed ongoing weakness in the Japanese producer price index inflation, indicating little pressure on the Bank of Japan to shift away from its ultra-dovish stance. Upcoming data on Japanese consumer price index inflation, expected on Friday, is also anticipated to decline, moving further away from the BOJ’s 2% annual target.
The TOPIX index, which touched a 34-year high, fell by 0.7% on Tuesday.
Across broader Asian markets, movement remained flat to lower. Australia’s ASX 200, among the worst performers for the day, recorded a nearly 1% decline, primarily attributed to losses in commodity prices, specifically iron ore, which weighed heavily on major mining stocks.
Analysts suggested that the ASX was undergoing a technical sell-off after reaching nearly 2.5-year highs around 7,600 points. A private survey also indicated a deterioration in Australian consumer sentiment in January due to persistent concerns about high inflation and interest rates.
South Korea’s KOSPI experienced a 0.7% decline, driven by weakness in heavyweight technology stocks, while Hong Kong’s Hang Seng index lost 0.3%. Internet giant Baidu rebounded nearly 3% after a significant slump on Monday.
Futures for India’s Nifty 50 index indicated a negative open, signaling profit-taking after closing above 22,000 points for the first time on Monday.
Chinese stocks, represented by the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes, showed some strength on Tuesday, recovering slightly after recent multi-year lows. Bargain buying interest increased in Chinese markets as steep losses presented seemingly attractive valuations. Focus now turns to Chinese gross domestic product data for the fourth quarter, set to be released on Wednesday, along with industrial production and retail sales figures for December.