Asian Stocks Struggle Following Fed’s Rate Cut Announcement
Asian stocks were a mixed bag on Thursday, taking a weak lead-in from Wall Street after the Federal Reserve shot down expectations for interest rate cuts coming as soon as March 2024.
Investors saw Japan’s and Australia’s indexes as the biggest losers of the day, losing between 0.8% and 1% as dampened risk appetite saw traders lock-in recent profits. The Nikkei pulled away from a 34-year high, while the ASX 200 lost sight of a record peak.
The hawkish signals from the Bank of Japan also contributed to the weakness in Japanese stocks. A recent summary of opinions from the BOJ showed that policymakers discussed the possibility of a near-term exit from the bank’s ultra-dovish policy.
Fed Chair Jerome Powell indicated that the bank was in no hurry to begin cutting interest rates, especially by March 2024. Although he noted the resilience of the U.S. economy, he stopped just shy of declaring victory over inflation, leading to speculation that the Fed’s rate cuts might only be delayed by a few months. Some analysts also believe that the Fed could potentially cut rates by a bigger margin later this year to make up for the delay.
The plans to cut interest rates have been a key point of focus for Asian stock markets, as they are likely to affect the scale of capital flows to the region over the coming months.
South Korea’s index added 1.2%, while futures for India’s index pointed to a muted open.
Chinese stocks rebound despite weak economic data
China’s indexes rose 0.9% and 0.4%, respectively, rebounding from near multi-year lows despite persistent signs of economic weakness in the country.
Hong Kong’s index was the best performer in Asia, rising nearly 2% after logging steep losses earlier this week.
Recent monetary stimulus measures from the Chinese government provided a limited boost to stocks. But local stocks largely reversed this rally earlier this week after reports indicating that local, government-backed institutions were the main backers of a brief rally in January.
China’s manufacturing sector grew as expected in January, but the pace of growth remained weak. Separate data showed that China’s new home sales plummeted in January, signaling little relief for a deepening property market crisis in the country.
Despite these challenges, Chinese stocks displayed resilience, offering hope for the market’s recovery in the near future.
