Asian stocks slip ahead of Powell address, China boost fades

© Reuters.

By Ambar Warrick

Investing.com -- Most Asian stock markets fell on Tuesday as a recent rally fueled by optimism over a Chinese reopening faded, while investors also grew cautious ahead of more cues on U.S. monetary policy from Federal Reserve Chair Jerome Powell.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.1% and 0.2%, respectively, while Hong Kong’s Hang Seng index sank 0.2% from an over six-month high. Losses in the three indexes were limited as heavyweight technology stocks gained on reports that Beijing will cease its regulation crusade against the country’s biggest internet firms.

But investors grew cautious over a near-term economic recovery in China, as the country faces its worst yet COVID-19 outbreak after it relaxed most anti-COVID measures.

Still, China’s benchmark indexes traded close to multi-month highs, having marked a stellar recovery in December as traders positioned for an eventual recovery in the world's second-largest economy.

Broader sentiment in Asian markets grew cautious ahead of the Powell address, with the focus turning to any shifts in the Fed Chair’s hawkish rhetoric, especially as recent economic readings indicated cooling inflation expectations. Focus this week is also on U.S. consumer inflation data for December, which is expected to show a further easing in price pressures.

India’s Nifty 50 and BSE Sensex 30 indexes fell 0.6% each, while Indonesian stocks led losses in Southeast Asia with a 1.5% tumble. China-exposed bourses in South Korea and Australia sank 0.2% and 0.3%, respectively.

Overnight comments from some Fed officials reinforced the notion that the central bank will keep rates higher for longer, also denting regional sentiment. But the Fed is expected to hike rates at a slower pace in the coming months, which is likely to provide some relief to Asian markets after rising interest rates battered regional stocks in 2022.

Japan’s Nikkei 225 index was among the few exceptions on Tuesday, rising 0.7% in catch-up trade after a long weekend. But higher-than-expected inflation readings from Tokyo for December pointed to more economic pain for the country, as it struggles with rising price pressures and a weakened yen.

Singapore stocks were buoyed by a near 6% jump in shares of commodity trading giant Olam Group Limited (SGX:OLAG). The stock hit an over five-month high after Olam said it is planning to list its agricultural business in Saudi Arabia by at least June 2023.