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©Reuters.
Investing.com — Asian stocks ranged from flat to low on the first trading day of 2024. This comes as conditions worsened due to China’s economic downturn, while Japan’s devastating earthquake also spooked traders.
Most regional markets were also expected to see some correction after strong gains through December, amid growing expectations that the U.S. Federal Reserve would cut interest rates in early 2024. Asian trading was solid on Tuesday.
Sentiment towards Asia was also hurt by a strong earthquake in central Japan, which destroyed several houses and severed railway lines across the region. Japanese markets were closed for a week-long holiday, but the index fell 0.4%. The index was the best-performing major stock index in 2023, rising nearly 30%.
Chinese stocks have continued to lag behind their peers since posting steep losses in 2023, with recent Purchasing Managers Index data showing little improvement in corporate activity.
Chinese stocks fall due to disastrous official PMI
China’s blue-chip index fell 1.1%, widening its decline by more than 12% from 2023 as weak official PMI data showed the world’s second-largest economy continued to slump. Blue-chip stock indexes also traded at their lowest levels in about five years.
The index fell 0.3% on Tuesday, while the Hong Kong index fell 1.7% as mainland stocks fell.
China contracted more than expected in December, and the average value for 2023 also shows a contraction. The economy is still expected to contract in December.
Although there were some signs of recovery in manufacturing activity, growth remained significantly lower due to continued weakness in offshore demand for Chinese products.
China’s post-COVID-19 economic recovery almost didn’t materialize in 2023 as the country faced deflation and stalled government stimulus. As a result, investors were mainly wary of the Chinese market, and stock outflows continued throughout the year.
Asian markets as a whole remained flat to low, with Australia up 0.4% and South Korea down 0.1%.
Futures prices for Indian indexes suggested a bearish move as Indian stocks are expected to take profits after recording a strong rally in 2023. Nifty is also keeping its sights set on record highs.
Markets have been waiting this week for further clues about a U.S. interest rate cut, primarily from December’s key indicators, which will be released on Friday. But hopes for an early Fed rate cut remain high, with traders suggesting they are pricing in a more than 70% chance of a 25 basis point (bp) cut in March.
Expectations for an early rate cut by the Federal Reserve led to a big rally on Wall Street into December, which spilled over into Asian markets. However, whether this increase is sustainable will depend largely on U.S. economic indicators.
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