Dec 19, 2023: Most Asian stocks stayed within a narrow range on Tuesday as the recent surge following the Federal Reserve’s meeting seemed to be plateauing. However, Japanese markets witnessed a notable upswing after the Bank of Japan (BOJ) reiterated its ultra-dovish policy stance.
While U.S. stock benchmarks ended on a positive note, Fed officials downplayed the notion of a complete shift away from their hawkish stance due to ongoing inflation concerns.
The Fed’s comments tempered expectations for immediate interest rate cuts, although the market sentiment still leaned toward a potential rate cut by March 2024.
The earlier dovish signals from the Fed had driven significant gains in Asian markets over the past week.
Japan’s Nikkei 225 surged by 1.2%, led by industrial and technology stocks following the BOJ’s decision to maintain negative short-term rates and continue its yield curve control measures.
Market watchers awaited hints from the bank regarding plans for tightening policy in 2024. However, the BOJ provided limited clues on such moves, reaffirming its commitment to stimulus measures amidst ongoing risks to the Japanese economy.
The bank faces pressure to consider policy tightening as Japanese inflation has consistently exceeded the BOJ’s 2% annual target for nearly two years. The BOJ anticipates inflation to remain elevated in the near term but expects its growth rate to moderate.
The BOJ’s sustained ultra-dovish stance has been pivotal for Japanese stocks this year, with the Nikkei trading near three-decade highs reached last month. While other major central banks tightened monetary conditions in response to inflation, the BOJ retained exceptionally low interest rates.
All eyes are on the BOJ’s forthcoming press conference scheduled at 16:00 JST (08:30 GMT).
In individual stock movements, Nippon Steel Corp (TYO:5401) saw a 3.3% decline after announcing its acquisition of U.S. Steel Corporation (NYSE:X) for $14.9 billion in cash.
Across broader Asian markets, movements were subdued, with some positive sentiment prevailing after the BOJ’s decision.
Australia’s ASX 200 outperformed peers, climbing 0.9% following the Reserve Bank’s decision to hold rates and await further economic signals.
South Korea’s KOSPI dipped 0.1%, while China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes remained stable. Hong Kong’s Hang Seng faced a 0.5% decline, mainly due to losses in heavyweight real estate stocks.
The week also highlights the People’s Bank of China’s upcoming loan prime rate decision, expected to maintain current rates.
India’s Nifty 50 index futures suggested a steady opening, holding near record highs on increasing optimism about the country’s economy, which has been the fastest-growing major economy over the past year.
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