24 Apr
Concerns over the recession and potential rate hikes weigh down Asian stocks further.
- Asian stock markets continued to suffer losses for the third straight session on Friday. Weak data and hawkish signals from the Federal Reserve exacerbated concerns over an economic slowdown, leading to a sell-off in most markets.
- The Chinese markets were among the worst performers, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes falling over 1% each. Investors remained cautious due to concerns over a mixed economic recovery in the country, with the manufacturing sector continuing to struggle. While the Chinese economy grew more than expected in the first quarter, the weak data on foreign direct investment in March raised doubts over the economy’s rebound this year.
- In Japan, the Nikkei 225 index also fell 0.2% due to sticky consumer price index inflation through March. The reading added pressure on the Bank of Japan to eventually tighten policy, despite dovish signals from new Governor Kazuo Ueda. Preliminary data on manufacturing and service sector activity in the country also missed estimates in April, further weighing down on the market.
- Technology-heavy Asian markets fell, tracking weak cues from Wall Street, with the Hang Seng index in Hong Kong and KOSPI in South Korea losing about 0.6% each. The Taiwan Weighted index also fell 0.1%, taking little support from Taiwan Semiconductor Manufacturing Co, even though the firm reported better-than-expected first-quarter earnings. In India, the Nifty 50 and BSE Sensex 30 indexes were flat in early trade, while Australia’s ASX 200 index fell 0.4%.
- Broader Asian markets retreated due to softer-than-expected U.S. manufacturing data, which raised fears of a slowdown in the world’s largest economy. The signs of a cooling labor market and weaker-than-expected earnings from electric carmaker Tesla Inc also added to negative cues for Asian markets. The losses in Tesla spilled over to several Chinese EV makers.
- Furthermore, hawkish signals from Federal Reserve officials continued to rattle sentiment, with policymakers calling for more rate hikes to curb relatively high inflation. Philadelphia Fed President Patrick Harker warned that U.S. interest rates would likely rise further and remain there for longer, even as economic activity cools. The Fed’s Beige Book, released earlier this week, painted a dour picture of the world’s largest economy.
- Markets are now positioning for one more rate hike by the Fed in May, with investors somewhat conflicted over a potential pause in June.
In summary, Asian stock markets suffered losses for the third straight session, with concerns over an economic slowdown exacerbated by weak data and hawkish signals from the Federal Reserve. Most markets, including China and Japan, suffered losses, while technology-heavy markets and Indian markets remained flat. The weak cues from Wall Street and Tesla’s earnings added to negative sentiment, along with hawkish signals from the Federal Reserve. Investors are now positioning for one more rate hike by the Fed in May, with some uncertainty over a potential pause in June.
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