Asia stocks were in retreat on Tuesday with investors nervous ahead of the latest Fed signals on interest rates, while Beijing’s “historic” batch of support measures for its struggling property sector failed to hit home.
Gold eased back from Monday’s all-time peak, while crude oil declined on worries of US rates staying high for longer as Federal Reserve officials are seen maintaining a cautious view on a recent easing of inflation.
Japan’s Nikkei share average surrendered early gains to end lower, as investors also slowed activity ahead of US chipmaker Nvidia’s earnings report.
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The Nikkei fell 0.31% to 38,946.93, after rising as much as 0.7% earlier in the session. The index rose 0.78% in the previous session, hitting 39,000 level for the first time in a month. The broader Topix fell 0.30% to 2,759.72.
Air-conditioner maker Daikin Industries fell 4.68% to become the biggest drag on the Nikkei. Technology investor SoftBank Group lost 1.64%, while the insurance sector rose 2.29% to become the best performer among the Tokyo Stock Exchange’s 33 industry sub-indexes.
China stocks edged down led by cyclical shares, as Beijing’s measures to lift the country’s struggling property sector failed to boost sentiment. Hong Kong shares also fell as technology shares weighed.
The impact of recent policy moves including local state-owned enterprises’ (SOEs) home-buying plans and some higher-tier cities’ removal of purchase curbs on reviving national home sales remains uncertain, Fitch Ratings noted.
The CSI 300 real estate index was down 0.4%, reversing the upward trend since late April.
China’s blue-chip CSI300 index was down 0.40% with, earlier in the session, the consumer staples sector edging lower 0.1% and the healthcare sub-index down 0.55%. The financial sector sub-index, however, edged up 0.1%.
The Shanghai Composite Index slipped 0.42%, or 13.18 points, to 3,157.97, while the Shenzhen Composite Index on China’s second exchange retreated 0.75%, or 13.48 points, to 1,780.50.
Hang Seng Pullback
Chinese H-shares listed in Hong Kong – stocks belonging to companies from the Chinese mainland – fell 1.94% to 6,829.64, while the Hang Seng Index dropped 2.12%, or 415.60 points, to 19,220.62.
Elsewhere across the region, in earlier trade, Sydney, Seoul, Singapore, Taipei, Wellington, and Manila were also in the red, while Mumbai and Jakarta gained.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.9%, weighed down by the Hang Seng’s pullback from Monday’s multi-month peak.
Markets currently factor in about 41 basis points of Fed rate reductions this year, with a quarter-point cut fully priced in for November.
Traders rushed to rebuild easing bets after data earlier this month showed consumer price pressures mitigated in April, following a string of three months of upside surprises at the start of the year.
Even so, Fed officials are reluctant to declare inflation is coming under control, with Vice Chair Philip Jefferson saying on Monday that it was too early to tell if the slowdown is “long lasting,” and Vice Chair Michael Barr saying restrictive policy needs more time.
Dollar Holds Firm
Minutes of the last Fed meeting due on Wednesday could provide valuable insight into the future policy path, although the deliberations predate last week’s softer CPI reading.
“Market sentiment remains relatively robust, with implied volatility low, supported by greater confidence in US rate cuts this year,” Kyle Rodda, senior markets analyst at Capital.com, wrote in a note.
At the same time, record highs for metals such as gold and copper “is being pointed to as a signal economic activity is improving globally, and that may be a factor keeping inflation sticky,” Rodda said.
Gold eased 0.3% to about $2,417 per ounce, after pushing to the cusp of $2,450 for the first time overnight.
The greenback held its ground against major peers, with the dollar index flat at 104.62 after rebounding from a five-week trough of 104.07 reached on Thursday.
The 10-year Treasury yield was little changed at 4.4433%, after ticking up 1.7 basis points on Monday.
Brent crude futures declined 0.7% to $83.17 a barrel and US West Texas Intermediate crude (WTI) eased 0.7% to $79.22.
Key figures
Tokyo – Nikkei 225 < DOWN 0.31% at 38,946.93 (close)
Hong Kong – Hang Seng Index < DOWN 2.12% at 19,220.62 (close)
Shanghai – Composite < DOWN 0.42% at 3,157.97 (close)
London – FTSE 100 < DOWN 0.47% at 8,384.44 (0950 BST)
New York – Dow < DOWN 0.49% at 39,806.77 (Monday close)
- Reuters with additional editing by Sean O’Meara
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