Anxiety prevails as Asian markets tumble

Asian markets witness a significant downturn on Wednesday, mirroring the global trend.

Traders are retracting from their positions, redirecting their focus to the upcoming release of Federal Reserve minutes and US jobs data.

The surge in equities during the final months of the previous year, fueled by expectations of multiple interest rate cuts by the US central bank, is now met with a cautionary tone. Analysts, previously warning of an overextended rally, anticipate a pullback, especially with tech giants like Apple and Amazon potentially facing repercussions.

Dennis DeBusschere of 22V Research notes, “The most common concern from investors is that overbought conditions and euphoric sentiment will set up for a reversal to start 2024 in both bond yields and stocks.”

On Wall Street, the Nasdaq experiences a 1.6 percent decline, and the S&P 500 also sees red, while the Dow manages a modest gain.

This negative sentiment extends to Asia, with Hong Kong, Sydney, Seoul, and Taipei among the prominent losers. Shanghai, however, bucks the trend with a slight increase.

London opens marginally higher, Paris dips, and Frankfurt remains flat. Vishnu Varathan at Mizuho Bank observes, “The year has kicked off with risk retrenchment,” questioning whether this is a sustainable correction or merely profit-taking ahead of the US jobs data.

The week’s crucial releases include the Federal Reserve’s December policy meeting minutes, expected to shed light on officials’ perspectives on the rates outlook.

The post-meeting statement hinted at three cuts this year, but market participants anticipate more. Additionally, the non-farm payrolls (NFP) figures on Friday will provide insights into the economy’s performance following the Fed’s efforts to curb inflation.

IMF boss Kristalina Georgieva expresses optimism about the Fed achieving an economic soft landing, stating, “Where the US economy is today, definitely a soft landing.”

Investors are closely monitoring developments in China after reports of a top gaming industry official being removed amidst planned curbs.

Draft restrictions aim to limit in-game purchases and prevent obsessive gaming behavior, causing a significant impact on the country’s tech giants.

Key Market Figures (as of 0810 GMT):

Hang Seng Index (Hong Kong): Down 0.9% at 16,646.41 (close)
Composite (Shanghai): Up 0.2% at 2,967.25 (close)
FTSE 100 (London): Up 0.1% at 7,731.20
Nikkei 225 (Tokyo): Closed for a holiday
Dollar/Yen: Up at 142.45 yen from 141.99 yen
Euro/Dollar: Up at $1.0960 from $1.0946
Pound/Dollar: Up at $1.2640 from $1.2621
Euro/Pound: Down at 86.67 pence from 86.70 pence
West Texas Intermediate: Down 0.3% at $70.18 per barrel
Brent North Sea Crude: Down 0.2% at $75.73 per barrel
Dow (New York): Up 0.1% at 37,715.04 points (close)