Asia stocks sink on hawkish Fed jitters, weak China inflation

Most Asian stocks fell on Thursday amid increasing conviction that U.S. interest rates will fall at a slower pace this year, while weak inflation data from China also added to concerns over slowing growth. 

Regional markets took middling cues from a flat overnight close on Wall Street, as the minutes of the Federal Reserve’s December meeting reiterated the central bank’s hawkish outlook on rates this year. 

Policymakers were also seen expressing some concerns that expansionary and protectionist policies under President-elect Donald Trump could underpin inflation. 

U.S. stock index futures fell in Asian trade. Chinese stocks fall as Dec inflation data underwhelms 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell about 0.3% each, while Hong Kong’s Hang Seng index rose slightly.

Consumer price index inflation remained largely flat in December, data showed on Thursday, while producer price index inflation shrank for a 27th consecutive month. 

The data showed little improvement in Chinese disinflation, even as Beijing doled its most aggressive round of stimulus measures yet since late-September. 

Weak consumer sentiment has been a key point of pressure on the Chinese economy, as concerns over slowing growth and a prolonged property market downturn largely deterred spending over the past two years. 

The Chinese economy also faces increased headwinds from trade tariffs under Trump, although Beijing is expected to dole out even more stimulus measures to offset this.

Investors are watching for any fiscal measures aimed at shoring up consumer spending.  Japanese stocks fall as strong wage data fuels BOJ jitters

Japan’s Nikkei 225 fell 0.8% on Thursday, as did the broader TOPIX index.

Local markets were spooked by data showing overall wage incomes picked up in November, while average cash earnings also grew more than expected.

The strong wage data factored into fears that robust private consumption will boost inflation in the coming months, giving the Bank of Japan more impetus to hike interest rates further. 

The yen firmed after the wage data, pressuring Japanese export stocks. 

Still, the BOJ has offered scant cues on when it will raise interest rates further. The central bank had last signaled that it could wait until March’s wage negotiations before making a decision.

Broader Asian stocks largely retreated on Thursday, amid growing concerns over higher for longer U.S. interest rates. 

Australia’s ASX 200 index fell 0.4%. Retail sales data from the country read weaker than expected for November, while separate data showed a bigger-than-expected rise in its trade balance , on a recovery in commodity exports. 

Singapore’s Straits Times Index fell 0.4%, while South Korea’s KOSPI was the sole gainer among its peers, rising 0.4% in an extended recovery from December’s rout. But political uncertainty in the country still remained high, amid ongoing efforts to arrest President Yoon Suk Yeol over his failed attempt to impose military law.

Futures for India’s Nifty 50 index pointed to a soft open, following some weak earnings from the country this week. Indian earnings are set to pick up in earnest next week. 

Source: Investing.com