Asian stocks displayed limited movement on Wednesday, characterized by cautious trading as concerns persisted regarding higher U.S. interest rates. Japanese indexes experienced a retreat from record highs, especially as a tech-driven rally cooled.
Market sentiment in the region followed a neutral lead from Wall Street, with caution prevailing ahead of the release of the PCE price index data, the Federal Reserve’s preferred inflation gauge. Investors remained cautious amid repeated warnings from Fed officials about the persistence of sticky inflation, suggesting that interest rates would remain elevated for an extended period. U.S. stock futures showed mild negativity during Asian trading.
The prospect of higher interest rates for an extended duration adds near-term pressure on Asian stocks.
In Japan, the Nikkei 225 declined by 0.3%, and the broader TOPIX lost 0.3%, retracing from the record highs achieved in the previous session. Investors were prompted to secure recent profits, and global risk appetite experienced a downturn. Additionally, a hotter-than-expected Japanese inflation reading fueled speculation about the Bank of Japan (BOJ) potentially raising interest rates as early as April. This speculation threatens to end the nearly decade-long era of ultra-dovish, low-interest-rate conditions in Japanese markets.
In China, the Shanghai Shenzhen CSI 300 and Shanghai Composite index initially saw gains but later traded in a flat-to-low range due to heightened concerns about the country’s troubled property market. Country Garden Holdings, a beleaguered developer, faced a liquidation petition in a Hong Kong court over its inability to repay a HK$1.6 billion ($200 million) loan. This development adds to the deepening property crisis in China, which is grappling with declining sales and a loss of confidence among Chinese consumers. The property-related concerns contributed to a 0.5% decline in Hong Kong’s Hang Seng index.
Overall, Asian markets exhibited cautious trading, with apprehension about U.S. interest rates limiting significant buying activity. Australia’s ASX 200 showed a flat performance, and South Korea’s KOSPI was among the relatively better performers, rising by 0.6% as it recovered from two consecutive days of losses.
Futures for India’s Nifty 50 index hinted at a mildly positive opening, with heavyweight tech stocks expected to track small gains seen in their U.S. counterparts.