Asian markets experienced a widespread decline on Friday, led by Chinese stocks, as renewed worries about a decelerating economy weighed on investor sentiment. Meanwhile, Japan’s Nikkei 225 initially surged but lost momentum following robust inflation data.
The unexpected interest rate cut by the Swiss National Bank caught global markets off guard, resulting in heightened demand for the dollar and dampening enthusiasm for riskier assets beyond U.S. borders. This abrupt shift in market dynamics overshadowed the positive performance of Wall Street, which closed at all-time highs on Thursday. Additionally, U.S. stock futures pared early gains and traded sideways during Asian trading hours.
Chinese stocks tumble as fiscal revenue falls, stimulus cheer wanes
On Friday, China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes both experienced a 1.6% decline, marking them as some of the worst-performing indexes in Asia. The Hang Seng index in Hong Kong also tumbled by 2.6%, largely driven by losses in technology and mainland stocks.
The dip in these indexes led to weekly losses, with no clear catalysts identified for Friday’s downturn. However, ongoing concerns regarding slowing economic growth and underwhelming stimulus efforts contributed to the negative sentiment.
Government data revealed a 2.3% drop in China’s fiscal revenues during the first two months of 2024. Despite this, the People’s Bank of China indicated that it still had room to implement further monetary stimulus by cutting its reserve requirement ratio. However, such measures have thus far failed to significantly bolster the Chinese economy.
Nikkei rally cools after brief burst above 41,000; CPI rises
On Friday, Japan’s Nikkei 225 index initially surged as much as 1% to reach a record high above 41,000 points before settling at a flat level. However, this upward momentum was short-lived, as data revealed a sharp increase in Japanese consumer price index (CPI) inflation for February. This development came shortly after the Bank of Japan’s historic interest rate hike, reinforcing the central bank’s hawkish stance.
Analysts at Citi suggested that the Nikkei is likely to remain rangebound around the 41,000-point mark due to a lack of immediate catalysts for further gains and the anticipated tightening of monetary policy by the BOJ.
In broader Asian markets, Australia’s ASX 200 index declined by 0.5% after nearing record highs earlier in the week. South Korea’s KOSPI also experienced a 0.4% decrease, driven by losses in heavyweight technology stocks.
Meanwhile, futures for India’s Nifty 50 index indicated a muted open, following a significant rebound from recent losses on Thursday. The Nifty was expected to open above the 22,000 level, reflecting cautious sentiment amidst mixed market dynamics in the region.