Dec 13, 2023: The trading day witnessed a decline in most Asian stocks on Wednesday, characterized by cautious sentiment prevailing before the Federal Reserve’s conclusive meeting for the year. Adding to the uncertainty surrounding the central bank’s outlook, a concerning U.S. inflation report contributed to the prevailing risk aversion.
The apprehensions regarding feeble economic growth in China persisted, reflecting in sustained losses among local stocks subsequent to recent data signaling an exacerbation of the disinflationary trend in the nation.
China’s Shanghai Shenzhen CSI 300 index was among the significant losers, experiencing a 1% decline, hovering slightly above a five-year low. Similarly, the Shanghai Composite underwent a 0.6% reduction.
The downturn in mainland stocks significantly impacted Hong Kong’s Hang Seng index, which fell by 1%.
Recent data revealing a deepening disinflationary trend in China during November heightened concerns regarding an extended slowdown in Asia’s largest economy. These inflation figures followed a string of other moderately encouraging readings for November.
Despite assurances from Chinese officials promising additional stimulus measures, including calls from senior Communist Party officials for increased fiscal expenditure and supportive policies, market enthusiasm remained limited.
The broader Asian markets displayed a subdued stance as investors opted for a cautious approach ahead of the Fed meeting. The marginal increase in U.S. inflation data further intensified uncertainties regarding the potential timing of rate adjustments by the central bank in 2024.
However, market sentiments leaned towards the belief that the Fed would maintain current rates by the end of the day, offering some solace to Asian markets. The strong closure on Wall Street from the previous day also contributed to this relief.
Japan’s Nikkei 225 index registered a 0.5% rise, extending gains for the third consecutive session amidst mounting confidence in the Bank of Japan’s inclination to sustain its ultra-loose policy for an extended period.
Meanwhile, Australia’s ASX 200 index observed a 0.4% increase, with healthcare provider Sigma Pharmaceuticals Ltd (ASX:SIG) experiencing a remarkable 50% surge following its merger agreement with Chemist Warehouse Group.
South Korea’s KOSPI experienced a 0.5% decline, while Indonesian stocks led the downturn in Southeast Asia, marking a 0.6% drop.
The recent substantial gains in Asian stocks, driven by increasing expectations of a less hawkish Fed in 2024, face a critical test today. The central bank is widely anticipated to reveal its outlook for 2024, putting these expectations to the test.
Indian Stocks Retreat from All-Time Highs as Inflation Surges
The Nifty 50 index in India commenced Wednesday’s session marginally weaker, marking a further retreat from its record highs earlier in the month.
Tuesday’s data showcased a notable increase in Indian Consumer Price Index (CPI) inflation during November, aligning with the Reserve Bank of India’s cautionary note on the resurgence of inflation. The surge primarily stemmed from elevated food prices.
The escalation in inflation poses a certain level of risk to the Indian economy, which holds the status of being the fastest-growing major economy globally. However, despite this concern, the optimism surrounding the nation’s economy, coupled with the increasing likelihood of a re-election for the ruling BJP party, had been the pivotal factors propelling a rally in Indian stocks throughout the year.