Asian stocks extend new year rout amid profit-taking, rate-cut anxiety

Investing.com– Most Asian stocks fell on Thursday, extending declines after a weak start to the year as persistent doubts over the timing and scale of the Federal Reserve’s interest rate cuts saw investors lock-in more profits.

Regional markets took a weak lead-in from Wall Street, with U.S. stock benchmarks falling for a second straight session on Wednesday as sentiment towards equities remained on edge. U.S. stocks also saw a heavy dose of profit-taking after a stellar melt-up through December.

In Asia, Japan’s index was the worst performer, losing 1.2% in catch-up trade after an extended new year’s holiday. Sentiment towards Japan was also rattled by a devastating earthquake earlier this week, which killed scores of people and caused widespread disruption in central Japan.

(PMI) data showed that Japanese manufacturing activity remained in contraction in December.

Losses in heavyweight technology stocks also weighed on the Nikkei, mirroring a trend seen across most stock markets.

Asian tech falls further as rate cut uncertainty persists

Technology-heavy indexes continued to bear heavy losses as markets second-guessed just when the Fed could begin trimming interest rates this year. South Korea’s fell 0.9%, while Hong Kong’s index shed 0.4%.

The showed central bank officials acknowledging progress against inflation over the past year. But the minutes also offered few cues on when the bank could potentially begin trimming interest rates as signaled during the meeting.

The minutes showed policymakers concerned over a soft landing for the U.S. economy, and whether monetary policy was too restrictive.

While the Fed is still expected to trim rates by at least 75 basis points in 2024, markets remained uncertain over the timing of the potential cuts. This spurred a heavy dose of profit-taking in tech stocks, which had risen sharply through December on the prospect of rate cuts this year.

Markets were also cautious before data due this Friday, which is expected to factor into monetary policy.

Broader Asian stocks extended recent losses, with Australia’s falling 0.3% and coming further off a recent 2-1/2-year high. PMI data showed Australia’s remained in contraction through December.

Futures for India’s index pointed to a weak open, with the index due for more profit-taking after hitting a series of record highs in December. PMI data on Wednesday showed grew less than expected in December.

Chinese stocks continued to lag their peers as a positive private survey on the services sector did little to inspire confidence in the country. The bluechip index fell 1.1% and remained close to a five-year low, while the index lost 0.7%.

The showed that China’s service sector grew more than expected in December.

But the reading still showed that an economic recovery in China remained under pressure, especially as manufacturing activity- which makes up a bigger portion of the economy- remained laggard through December.

Official released earlier this week also painted a much weaker picture of the economy than the Caixin readings.

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