Investing.com-- Most Asian stocks fell on Wednesday, tracking steep overnight losses on Wall Street as markets second-guessed expectations for early interest rate cuts by the Federal Reserve, especially before more key economic cues this week.
Concerns over slowing growth in China remained in play, following weak official purchasing managers index readings released earlier this week. The Chinese government also recently downgraded its gross domestic product figure for 2022, which could herald a weak reading for 2023.
China’s Shanghai Shenzhen CSI 300 fell 0.2% and remained close to a five-year low, while the Shanghai Composite index traded sideways. Both indexes logged heavy losses in 2023.
Broader Asian stocks fell on Wednesday, with the technology sector seeing the heaviest losses following a rout in U.S. majors.
Wall St rout, Apple losses hit Asian tech stocks
Tech-heavy indexes were the worst performers in Asia. South Korea’s KOSPI slid 1.7%, while Hong Kong’s Hang Seng index shed 1.1%.
Losses in major Apple Inc (NASDAQ:AAPL) suppliers also weighed on Asian bourses, after Barclays (LON:BARC) downgraded the iPhone maker citing a looming slowdown in device sales.
Heavyweights such as Samsung Electronics Co Ltd (KS:005930), AAC Technologies (OTC:AACAY) Holdings Inc (HK:2018) and SK Hynix Inc (KS:000660) fell between 2% and 3%, while TSMC (TW:2330) (NYSE:TSM)- the world’s biggest contract chipmaker- sank 2.4% in Taiwan trade.
Tech stocks were also pressured by anticipation of the minutes of the Fed’s December meeting, which were due later on Wednesday.
Analysts warned that the minutes may not strike as dovish a chord as markets were hoping. While the central bank had signaled rate cuts in 2024, it had given scant cues on the timing of said cuts.
Fed officials also recently warned that expectations for early rate cuts were overly optimistic, given that inflation and the labor market were still running hot.
Expectations of early interest rate cuts had driven strong gains in global stock markets through December. But this also made stock markets vulnerable to a sharp pullback on any doubts over the early rate cuts.
Still, the CME Fedwatch tool showed traders still pricing in a nearly 70% chance for a 25 basis point cut in March.
Markets were also awaiting key nonfarm payrolls data this week, which is expected to show some cooling in the labor space. But markets remained on edge over a stronger reading, given that payrolls almost consistently beat expectations through most of 2023.
“Friday's payrolls report can be pivotal here, but based off consensus expectations the market will remain without validation from the labour market. Also, the Fed's FOMC minutes due on Wednesday are unlikely to be as racy as Chair Powell was at the press conference,” analysts at ING wrote in a note.
Broader Asian markets tracked weakness in Wall Street. Australia’s ASX 200 sank 1% from a 2-½ year high.
Futures for India’s Nifty 50 index pointed to a weak open, with the index likely to see more profit-taking after logging stellar gains in 2023. Heavyweight Indian tech stocks such as Infosys (NS:INFY) and HCL Technologies Ltd (NS:HCLT) were also set to track their U.S. peers.
Japanese markets were closed for a week-long holiday. But futures for the Nikkei 225 index rose 0.4%.
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