Key Points:
- Asian stocks declined following Wall Street’s overnight losses due to hawkish comments from Federal Reserve officials and Middle East tensions.
- Japan’s Nikkei 225 index tumbled 1.96% to reach a two-week low, driven by profit-taking and monetary policy uncertainties.
- South Korea’s KOSPI fell over 1%, driven by a 0.94% decline in Samsung Electronics, while Hong Kong’s Hang Seng index saw a marginal gain of 0.016%
- Australia’s ASX 200 declined by 0.56% due to major bank and mining stock losses, while the Indian stocks reached record highs.
On Friday, most Asian stocks experienced declines, mirroring the overnight downturn on Wall Street, as hawkish comments from Federal Reserve officials raised uncertainties about potential U.S. interest rate cuts. Additionally, escalating tensions in the Middle East, particularly threats from Iran against Israel, leading further risk across the region. Trading volumes remained subdued due to a Chinese market holiday.
The weak sentiment in Asian markets followed a sharp decline in U.S. benchmarks, which dropped by more than 1% on Thursday. The decline was attributed to warnings from Fed officials regarding persistent inflation, suggesting delays in interest rate cuts. Market participants were also cautious before releasing key nonfarm payroll data, which is expected to influence the Fed’s monetary policy outlook.
Japan’s Nikkei 225 index was the hardest hit in Asia, tumbling 1.96% to reach a two-week low. Extended profit-taking weighed on the index, which had surged to record highs in March. Concerns over inflation and monetary policy uncertainties in Japan contributed to the downward pressure, particularly with the possibility of further interest rate hikes by the Bank of Japan amid sticky inflation. Export-oriented stocks suffered the most, exacerbated by the yen’s strengthening to a two-week high.
Other Asian markets also trended lower, with technology stocks echoing the declines seen in their U.S. counterparts. South Korea’s KOSPI fell over 1%, driven by a 0.94% decline in Samsung Electronics despite the company’s optimistic profit forecast. Hong Kong’s Hang Seng index saw a marginal gain of 0.016%, partly influenced by catch-up trading following a holiday. Australia’s ASX 200 declined by 0.56%, weighed down by losses in major bank and mining stocks, compounded by disappointing trade balance data for February.
However, Indian stocks stood out as exceptions, with the Nifty 50 and Sensex hitting record highs on Thursday. The gains were attributed to increased buying activity in bank and industrial stocks and optimism surrounding the upcoming general elections 2024. Small-cap stocks also contributed to the positive sentiment. While the central bank is expected to maintain its policy repo rate at 6.5%, investors will closely monitor its outlook on inflation and economic growth for further insights into the country’s monetary policy direction.
