Asian stocks experienced a downturn on Tuesday, reversing gains from the previous session amid cautious sentiment ahead of key interest rate decisions by the Bank of Japan and the Federal Reserve later this week.
In China, markets underperformed their regional counterparts, with major indices hitting six-month lows as concerns persisted about a sluggish economic recovery. This lackluster performance mirrored a tepid Wall Street close on Monday, where investors refrained from significant moves amid uncertainty surrounding the upcoming central bank meetings.
U.S. stock index futures declined during Asian trading hours ahead of the Federal Reserve’s rate decision on Wednesday, with attention also on earnings reports from major technology firms.
Japanese stocks faced notable declines amidst uncertainty surrounding the BOJ’s policy stance. The Nikkei 225 and TOPIX indices both fell by 0.9%, reflecting uncertainty over whether the BOJ would adjust interest rates given recent modest inflation data that still falls short of the central bank’s 2% target.
Apart from interest rate decisions, uncertainty also loomed over the BOJ’s plans to scale back its quantitative easing measures, with further details expected at its July meeting. The prospect of reduced monetary support weighed on Japanese equities.
Meanwhile, Chinese stocks continued their downward trend, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes dropping by 0.9% and 0.8% respectively to their lowest levels since February. Hong Kong’s Hang Seng index also slid by 1.2% to a three-month low, exacerbated by concerns about a sluggish economic rebound and mixed signals on stimulus efforts from Beijing. Traders remained cautious amidst ongoing uncertainties surrounding U.S.-China trade relations, particularly in the context of the U.S. presidential election.
This week, market focus remained on upcoming Purchasing Managers’ Index (PMI) readings from China, expected to provide further insights into the health of Asia’s largest economy.
Across broader Asian markets, technology stocks faced declines ahead of earnings releases from major U.S. tech giants later in the week. South Korea’s KOSPI fell by 1%, while Taiwan’s TSMC shares dropped by 1.5%. Australia’s ASX 200 retreated by 0.8% ahead of a key consumer price index reading, which is anticipated to influence the Reserve Bank’s monetary policy decisions.
Looking ahead, futures for India’s Nifty 50 index indicated a negative start, following volatile trading sessions as the index struggled to surpass the 25,000-point mark.
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