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Asian stocks muted as rate anxiety persists; Japan falls from record highs

Published 02/28/2024, 11:08 AM
Updated 02/28/2024, 11:08 AM
© Reuters. Most Asian stocks kept to a tight range on Wednesday amid persistent caution over higher-for-longer U.S. interest rates, with Japanese indexes pulling back from record highs as a tech-driven rally cooled. 

Regional markets took a middling lead-in from Wall Street, as caution ahead of key PCE price index data- the Federal Reserve’s preferred inflation gauge- remained largely in play. 

The reading is due on Thursday, and comes amid repeated warnings from Fed officials that sticky inflation will keep rates higher for longer. U.S. stock futures were mildly negative in Asian trade. 

Higher-for-longer rates bode more near-term pressure for Asian stocks.

Japanese shares fall from record highs, BOJ caution in play 

Japan’s Nikkei 225 fell 0.3% on Wednesday, while the broader TOPIX lost 0.3% as both indexes retreated from record highs hit in the prior session.

Investors were encouraged to lock-in recent profits by souring risk appetite across the globe, while a recent, hotter-than-expected reading on Japanese inflation spurred increased speculation over the Bank of Japan.

Sticky inflation could push the BOJ into raising interest rates by as soon as April, bringing an end to the ultra-dovish, low interest rate regime enjoyed by Japanese markets for nearly a decade. 

China rebound stalls on fresh property woes 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite index curbed early gains and traded in a flat-to-low range, amid increased anxiety over the country’s beleaguered property market.

Embattled developer Country Garden Holdings (HK:2007) was hit with a liquidation petition in a Hong Kong court over its inability to repay a HK$1.6 billion ($200 million) loan.

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The petition, whose first hearing is scheduled for mid-May, puts Country Garden squarely in the center of a deepening property crisis in China, as the sector struggles with worsening sales and a broader loss of faith among Chinese consumers.

Losses in property and mainland stocks dragged Hong Kong’s Hang Seng index down 0.5%. 

Broader Asian markets were muted, with caution over U.S. interest rates limiting any major buying. 

Australia’s ASX 200 was flat as data showed consumer price index (CPI) inflation remained steady in January from the prior month. But the reading, along with core inflation, still remained well above the Reserve Bank’s target range, heralding little change to the bank’s hawkish outlook. 

Futures for India’s Nifty 50 index pointed to a mildly positive open, with heavyweight tech stocks set to track small gains in their U.S. peers. 

South Korea’s KOSPI was among the better performers for the day, rising 0.6% as it recovered from two straight days of losses.

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