Asian indexes experienced a mixed day on Wednesday with investors guided by both a downbeat Wall Street and hopes of an economic recovery in China after Beijing finally rolled back its painful Covid curbs.
Wall Street’s main indexes closed lower overnight with investors worried about the US Federal Reserve’s interest-rate hike path as they await minutes from its December policy meeting.
That pushed Japan’s Nikkei into the red as traders returned from their New Year break but China’s bourses were boosted by optimism over a post-Covid bounceback despite a crippling surge in infections.
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Tokyo’s Nikkei share average closed at its lowest level in almost 10 months in the first trading session of 2023, while the yen’s strength against the dollar also weighed on sentiment.
The yen rose to a seven-month high against the greenback on expectations that the Bank of Japan might move away from its ultra-easy monetary policy.
The Nikkei fell 1.45% to 25,716.86 on Wednesday, its lowest close since March 15. The broader Topix lost 1.25% to 1,868.15.
China’s stocks edged ahead, while Hong Kong’s Hang Seng Index jumped more than 3% as investors looked beyond the soaring Covid infections and instead focused on their hopes for a sustained recovery by the world’s No2 economy.
The Hang Seng Index gained 3.22%, or 647.82 points, to 20,793.11 while the Shanghai Composite Index rose 0.22%, or 7.00 points, to 3,123.52.
China’s second exchange, the Shenzhen Composite Index, was up 0.06%, or 1.23 points, to 2,005.35.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.91%, set for a third straight day of gains for the year. The index fell 20% in 2022.
Elsewhere across the region, Australia’s S&P/ASX 200 index rose 1.28%. Indian stocks dropped with Mumbai’s signature Nifty 50 index down 1.04%, or 189.60 points, at 18,042.95.
Fed December Meeting Minutes
Overnight, Wall Street’s main indexes closed lower with the biggest drags from Tesla and Apple as US equities made a slow start to the year after their steepest annual losses since 2008 in 2022.
Minutes from the Fed’s December meeting, when it cautioned rates may need to remain higher for longer, are due to be released later on Wednesday.
Investors will scour the minutes to figure out whether more policy tightening is likely.
Markets are pricing in rate cuts for late 2023, with fed fund futures implying a range of 4.25% to 4.5% by December.
Investors will get a better picture of the US labour market this week, with several pieces of data scheduled in the week, culminating in the employment report on Friday.
A weakening jobs market is seen as one of the key pieces needed to convince the Fed to begin slowing its monetary tightening path.
“It is too early to start betting on a Fed pivot this year and that should make this difficult environment for stocks,” said Edward Moya, senior market analyst at Oanda in New York.
The yield on 10-year Treasury notes was down 5.7 basis points to 3.735%, while the yield on the 30-year Treasury bond was down 4.5 basis points to 3.846%.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 3.7 basis points at 4.368%.
Oil prices steadied on Wednesday after diving 4.1% on Tuesday, the largest daily decline in more than three months, weighed by weak demand data from China, a gloomy economic outlook and a stronger US dollar.
Key figures
Tokyo – Nikkei 225 < DOWN 1.45% at 25,716.86 (close)
Hong Kong – Hang Seng Index > UP 3.22% at 20,793.11 (close)
Shanghai – Composite > UP 0.22% at 3,123.52 (close)
London – FTSE 100 > UP 0.27% at 7,574.65 (0940 GMT)
New York – Dow < DOWN 0.03% at 33,136.37 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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