Asian stocks experienced limited movement in holiday-thinned trade on Tuesday, with markets showing little cheer. Soft U.S. inflation data fueled expectations of rate cuts by the Federal Reserve in 2024, but uncertainty about the timing of such moves persisted. Doubts over further gains in U.S. markets and the lingering uncertainty over global economic conditions kept market sentiment subdued. With thin trading volumes due to Christmas holidays in major markets, Asian stocks lacked clear direction.
In Japan, the Nikkei 225 index remained flat as Bank of Japan Governor Kazuo Ueda highlighted progress toward the bank’s 2% annual inflation target. However, uncertainty about the timing of the BOJ’s policy pivot kept markets cautious. Japanese stocks, resilient due to loose monetary conditions, have been among the best performers in Asia in 2023.
Chinese stocks extended losses, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes falling 0.9% and 0.7%, respectively. Economic jitters in China persisted, with the CSI 300 hitting a near five-year low. Chinese stocks have been the worst performers in Asia this year, reflecting concerns about the country’s economic recovery and Beijing’s limited policy support.
Overall, the year-end holidays and thin trading volumes contributed to a lack of clear direction in Asian markets, despite the previous gains fueled by expectations of Fed rate cuts in 2024. The soft U.S. inflation data added to the uncertainty about the timing and extent of these potential rate cuts. Investors will continue to monitor developments in global economic conditions and central bank policies for cues in the coming weeks.