Asian shares faced mixed fortunes on Monday following a faltering rally on Wall Street last week. Japan’s Nikkei 225 index declined by 2.5%, despite the government revising figures to show a 0.1% growth in the economy for the last quarter of the year, a slight improvement from earlier reports but still below forecasts. This suggests the economy is not in a technical recession but is expanding sluggishly. Conversely, Hong Kong’s Hang Seng index rose by 0.9%, while the Shanghai Composite slipped by 0.1%.
The conclusion of China’s National People’s Congress on Monday is not expected to yield significant policy changes, as the mostly ceremonial body typically endorses decisions made by the ruling Communist Party’s top leaders.
Elsewhere in Asia, South Korea’s Kospi index fell by 0.2%, and Australia’s S&P/ASX 200 dropped by 1.5%.
On Friday, the S&P 500 experienced a 0.7% decline from its recent all-time high, marking its third losing week in the last 19. Initially, shares rose following mixed data on the U.S. job market, raising hopes for potential interest rate cuts later in the year. However, a subsequent downturn occurred, with influential stocks like Nvidia experiencing setbacks after a period of significant growth.
The jobs report revealed higher-than-expected hiring by employers last month, coupled with lower-than-forecast wage increases for workers. Additionally, job growth in January was not as robust as previously believed. The broader economy faces a delicate balance, needing just enough growth to avert recession without adding inflationary pressure.
The desired outcome is for prices to stabilize sufficiently to prompt the Federal Reserve to lower its main interest rate from its current peak, easing strain on the financial system and supporting economic recovery.
Lower interest rates can stimulate borrowing and investment, ultimately bolstering economic activity and supporting asset prices, including stocks.
Federal Reserve Chair Jerome Powell has hinted at the possibility of interest rate cuts, pending further confirmation that inflation is trending towards the central bank’s target of 2%. This stance reflects the Fed’s cautious approach to managing inflationary pressures while supporting economic growth.
The robustness of the economy remains a key factor for investors, with hopes that strong corporate profits will continue to drive market gains. Smith & Wesson Brands saw a significant surge in its stock price following better-than-expected quarterly profit results, driven by accelerated shipments in the firearms market.
However, Nvidia experienced a notable decline, marking its worst day since May. Despite significant gains earlier in the year, the stock faced criticism for its rapid ascent, particularly within the context of the broader market’s enthusiasm for artificial intelligence-related companies.
Similarly, Broadcom’s stock fell despite reporting favorable results, as its revenue forecast for the upcoming year slightly missed analysts’ expectations.
Costco Wholesale also experienced a decline after falling short of revenue forecasts for the latest quarter.
In commodity markets, U.S. benchmark crude oil and Brent crude oil both registered declines in early trading on Monday.
Meanwhile, the U.S. dollar saw a minor decrease against the Japanese yen and remained unchanged against the euro.