Asia stocks skittish as rate cut bets wane; China, Japan data offer mixed cues

Most Asian stocks kept to a tight range on Friday amid increased caution over U.S. interest rate cuts, while investors digested mixed economic readings from Japan and China. 

Regional markets took weak cues from Wall Street, which fell on Thursday after Federal Reserve Chair Jerome Powell warned that strength in the U.S. economy gave the central bank more time to consider interest rate cuts.

His comments, coupled with strong inflation data released this week, saw traders sharply pare bets on a December rate cut. U.S. stock index futures also fell in Asian trade, while the dollar and Treasury yields rose.  Chinese stocks muted amid mixed economic data

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes both fell slightly, while Hong Kong’s Hang Seng index traded marginally higher after a mixed batch of economic readings from the mainland.

Chinese industrial production rose less than expected in October, as did fixed asset investment . House prices also shrank during the month, signaling continued pressure on the property market.

But retail sales grew much more than expected, buoyed largely by the Golden Week holiday. The reading pushed up some hopes that retail spending will improve further, especially as Beijing mobilizes more stimulus.

Chinese stock indexes were set to lose around 2% this week, while the Hang Seng was down over 6%. Losses came as China’s latest round of fiscal measures largely underwhelmed investors hoping for more targeted measures.

Fears of a renewed trade war with the U.S. also weighed after Donald Trump won the 2024 presidential election. Japanese markets upbeat despite weak GDP 

Japan’s Nikkei 225 and TOPIX indexes rose 0.9% and 0.8%, respectively, largely shrugging off data that showed economic growth slowed sharply in the third quarter.

Gross domestic product grew 0.9% year-on-year, slightly beating expectations but slowing sharply from the 2.2% rise in the prior quarter, which was also revised lower. 

Private consumption remained heady, and was the sole point of support for the economy, especially as capital spending and foreign demand slowed. A strong yen had also weighed on Japanese exporters through the quarter, although the currency has since weakened sharply.

The weak reading pushed up hopes that the Bank of Japan will have little headroom to raise interest rates further, especially in the face of increased political uncertainty. 

Broader Asian markets kept to a tight range, as traders dialed back expectations for an immediate decrease in U.S. interest rates. 

Australia’s ASX 200 rose 0.5%, while South Korea’s KOSPI fell 0.5%. 

Futures for India’s Nifty 50 index pointed to a weak open, after the index slid into correction territory from its September record highs. 

Indian markets were battered by sustained foreign capital outflows, as optimism over the economy was dulled by sticky inflation. 

Sentiment towards broader Asian markets was also dented by the prospect of a Trump presidency, given that he has proposed increased tariffs on all imports to the U.S. China is likely to be the worst hit by these tariffs, with Trump proposing a 60% duty.

Source: Investing.com