It was a mixed bag for Asian stocks on Tuesday, as weak data from major economies put a damper on risk appetite. Japanese stocks, in particular, suffered a setback as they retreated from their impressive 33-year highs.
The mood turned sour with disappointing manufacturing activity reports coming in from the U.S., Germany, and China. These discouraging figures have fueled concerns about the slowing growth of the global economy.
Adding to the worries, the possibility of further interest rate hikes cast a shadow over regional stocks ahead of the Reserve Bank of Australia’s rate decision scheduled later in the day.
Uncertainty Surrounds RBA Rate Hike
The ASX 200 index in Australia showed little movement on Tuesday, with traders treading cautiously in anticipation of the highly anticipated interest rate decision by the Reserve Bank of Australia (RBA).
While a slim majority of analysts predict a 25 basis point rate hike by the RBA, citing inflation that remains above the central bank’s target range, there are market watchers positioning for a potential hold. They argue that certain sectors of the Australian economy, especially manufacturing output and the housing market, have started to deteriorate under the weight of high interest rates.
Japanese Stocks Slide After Reaching New Heights
The Nikkei 225 index took a hit, losing 1%, while the broader TOPIX dipped by 0.7%, marking a retreat from their 33-year peaks earlier in the week. The Nikkei was the worst-performing index in Asia for the day.
Although the Japanese economy has shown resilience, and the Bank of Japan has maintained a dovish stance, the rally in local stocks has lost some steam. Concerns about worsening global economic conditions and the rise in U.S. interest rates have played a role in this stagnation.
Daiichi Sankyo (TYO:4568), a pharmaceutical maker, suffered the most on the Nikkei, plunging by 14% after disappointing results from a lung cancer drug trial conducted in collaboration with the UK’s AstraZeneca PLC (LON:AZN).
Broader Asian Markets Remain Subdued
Broader Asian markets displayed a muted performance, with China’s Shanghai Shenzhen CSI 300 and Shanghai Composite trading sideways. Meanwhile, Hong Kong’s Hang Seng index managed to rise by 0.5%, building on the strong gains from the previous session.
A private survey released on Monday revealed that China’s manufacturing sector experienced slower growth in June compared to the previous month. This development has further cast doubts on the prospect of a robust recovery in Asia’s largest economy this year.
South Korea’s KOSPI saw a decline of 0.2%, while the Taiwan Weighted index made a modest gain of 0.1%.
Indian Stocks Reach Unprecedented Highs
Singapore-traded futures for India’s Nifty 50 index indicated a slightly positive start for local stocks on Tuesday after the Nifty and the BSE Sensex 30 closed at record highs on Monday.
Optimism surrounding the Indian economy, the technology sector’s significant presence, and increased foreign investments have been the driving forces behind the recent rally in Indian stocks.
However, analysts issued a cautionary note, warning of potential short-term pullbacks as valuations have surged significantly.