Asian stocks decline as China’s euphoria wanes, and the Fed comes into focus amid ambiguity on future interest rate stance

Asian stocks slump on uncertainty on Fed future policy

On Wednesday, the majority of Asian stock markets declined as concern about the direction of U.S. monetary policy.  Mainly overcame hope for a resurgence in China’s economy. Attention is now shifting to an overflow of data from the Fed this week.

Shanghai Composite and Shanghai Shenzhen CSI 300 indices in China both dropped by 0.5% and 0.3%, respectively. After the early lift from Tuesday’s greater-than-expected GDP figures seemed to fizzle out.

Despite the relaxation of anti-COVID measures earlier in the year. The manufacturing sector showed symptoms of prolonged vulnerability. Implying an uneven recovery even though the statistics did show that a Chinese economic turnaround was on pace.

Asian stock markets followed the overnight action of Wall Street

More general: Amid a tepid overnight action on Wall Street following a wave of split quarterly announcements. Asian markets trended down. Citing hawkish indications from a number of officials, markets also became warier about future interest rate increases by the Federal Reserve.

The Fed’s Beige Book report, which is coming later on Wednesday, will be the focus at this juncture. Its assessment of the status of the American economy. Later this week, remarks from Fed Governors Lisa Cook and Christopher Waller are also scheduled.

Wall Street focus on crucial earning reports

As the reporting season progresses, the upward trend in US stocks is strengthening even if earnings downgrades are still occurring.

As experts continue to lower their projections for 2023 and 2024 due to the possibility of a recession. Consensus EPS predictions for 2023 are currently nearly 10% lower than they were in mid-2022. The S&P 500 is projecting a -6.5% fall in profits year over year for the Q3 of 2012. Which would be the worst decline in earnings since the Q2 of 2020.

The concern surrounding rising interest rates damaged technology firms, and the Hang Seng index as a whole fell 0.6%, pushing declines into the second straight day. Taiwan’s weighted index decreased by 0.3% as well, while South Korea’s KOSPI showed no change.

The Reuters Tankan index revealed that big manufacturers were, even more, negative about economic conditions, despite weak foreign demand. Leading to a 0.3% decline in the Nikkei 225 index

The poorest performers in Southeast Asia were Philippine equities, which lost 0.5%. While India’s Nifty 50 and BSE Sensex 30 indices were down marginally during early trade. The ASX 200 index of Australia increased by 0.1%, mostly due to increases in significant mining firms. As a result of the possibility of a Chinese economic rebound.

As Fed jitters grow, Asia FX falls but the dollar remains stable

On Wednesday, most Asian currencies fell as the dollar marginally strengthened. Amid concern about rising U.S. interest rates damaging risky assets. Attention is now shifting to a flurry of economic statistics that are expected this week.

The dollar put more pressure on the Japanese yen this week. As new BoJ Governor Kazuo Ueda reaffirmed the institution’s commitment to its ultra-loose monetary stance. Forcing the yen to decline by 0.2%.

The yen suffered from worsening regional economic circumstances as well, with Friday’s important national inflation statistics. The Chinese yuan stood unchanged. This week’s attention is also on the People’s Bank of China’s interest rate announcement on Thursday.

Additionally, risky Southeast Asian currencies fell, with the Thai baht falling 0.3% and the Singapore dollar falling 0.1%. The report indicates that the nation’s trade balance increased more than anticipated in March. Which provided some support for the Malaysian ringgit.

Broader On Wednesday, Asian currencies slightly fell as traders remained cautious due to ambiguities on the direction of US monetary policy. Both the dollar index and the dollar index futures saw a little gain. Benefiting due to an overnight increase in Treasury rates.

The AUD increased marginally on Wednesday, among other things, as a Bloomberg survey revealed that analysts believed there was a decreased chance of a recession. After the Reserve Bank’s decision to stop raising interest rates.

However, the RBA continued to suggest that more rate increases may be necessary, particularly if inflation stays obstinate.

Gold

The price of gold declined on Wednesday as the U.S. dollar recovered a bit.  Also, traders evaluated the likelihood that the Fed will only increase interest rates once more in May.

As of 05:26 GMT, spot gold was lower by 0.1% at $2,003.99 per ounce. Futures for U.S. gold decreased by 0.2 percent to $2,015.80.

Since the dollar index increased, gold became less accessible to buyers using alternative currencies. Given the recent gain and technical overbought status, that may serve as support for the value of gold. But the chance of some undoing (in pricing) following confirmation of the Fed’s rate stance may still be present.