On Monday, a retreat in most Asian stocks unfolded as persistent concerns regarding prolonged elevated interest rates prompted profit-taking in the technology sector. Meanwhile, Japanese markets reached new record peaks in anticipation of crucial inflation data.
The technology stocks faced profit-taking following a robust rally in the past week, signaling a diminishing optimism in artificial intelligence. The session on Wall Street was relatively subdued on Friday, with U.S. stock futures showing minimal movement on Monday despite reaching record highs.
The market sentiment remained subdued due to anticipation surrounding various economic indicators scheduled for the week, providing insights into U.S. inflation and interest rates.
Chinese Equities Experience Pullback Amidst Stalling Rebound Rally; PMIs Awaited
On Monday, China’s Shanghai Shenzhen CSI 300 and SSEC indexes dipped by 0.6% and 0.5%, respectively. The retreat followed a recent rebound rally, which seemed to be losing momentum after reaching two and three-month highs.
Hong Kong’s Hang Seng index also fell by 0.6%, retracting from a nearly three-month peak. China had implemented a series of monetary stimulus measures while tightening regulatory controls on equity markets to boost investor confidence. Although these actions led to a significant rally in China’s benchmark indexes throughout most of February, the markets now face a fresh test with the release of key Purchasing Managers Index (PMI) data for February on Friday. The upcoming data is expected to provide further insights into the economic recovery of Asia’s largest economy.
In the broader Asian markets, a cooling tech rally led to a retreat. South Korea’s KOSPI witnessed a 0.5% decline, while Australia’s ASX 200 index traded sideways.
Futures for India’s Nifty 50 index indicated a mildly weak opening, although the index remained in proximity to the record highs achieved in the previous session.
Japanese Stocks Reach Unprecedented Highs; Attention Shifts to CPI Inflation Data
Japanese stocks stood out in Asia on Monday, extending recent gains to achieve record highs. The Nikkei 225 surged by as much as 0.7%, reaching an unprecedented high of 49,420.0 points. Simultaneously, the broader TOPIX index recorded an 0.8% increase, establishing a new record high at 2,686.27 points.
While Monday’s gains in Japan included elements of catch-up trade after local markets were closed for a long weekend, they also marked an extension of a prolonged rally in Japanese stocks. The rally was fueled by AI-driven strength in local technology and chipmaking stocks. Additionally, expectations that the Bank of Japan would maintain an ultra-dovish stance for an extended period contributed to the positive sentiment.
Investors are now eyeing Consumer Price Index (CPI) inflation data scheduled for release on Tuesday. The data is anticipated to reveal inflation figures falling within the Bank of Japan’s 2% annual target, further diminishing the impetus for the central bank to adopt an aggressive tightening policy.