Most Asian stocks showed little movement on Thursday as Japanese shares plummeted following the Bank of Japan’s indication of potential interest rate hikes. Meanwhile, a recovery in Chinese markets lost momentum due to disappointing business activity data.
Asian markets saw limited support from an overnight rally on Wall Street. The rally was fueled by signals from the Federal Reserve about a possible interest rate cut in September and strong earnings from the technology sector.
U.S. stock index futures rose during Asian trading hours, with attention shifting to upcoming earnings reports from tech giants Apple Inc (NASDAQ) and Amazon.com Inc (NASDAQ) later in the day.
Nikkei 225, TOPIX Fall as BOJ Signals More Rate Hikes
Japan’s Nikkei 225 and TOPIX indexes dropped by 3.1% and 3.8%, respectively, after the Bank of Japan unexpectedly adopted a more hawkish stance during its Wednesday meeting.
Governor Kazuo Ueda stated that the bank will continue to raise interest rates following a 15 basis point increase on Wednesday, especially if the economy and inflation improve according to the BOJ’s projections.
Initially, Japanese stocks reacted positively to the BOJ meeting since the bank took a somewhat dovish approach by outlining an extended timeline for reducing its bond-buying program.
However, Ueda’s comments, which were made after the market closed, suggested that the central bank might end its decades-long stimulus measures sooner than anticipated.
“If the economy and prices move in line with our projection, we will continue to raise interest rates,” Ueda said at a press conference. “We don’t see 0.5% as any key barrier when raising rates.”
The BOJ’s benchmark short-term rate was approximately 0.25% following Wednesday’s hike.
China’s Recovery Halts Amid Negative PMI Data
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes traded in a narrow range after rebounding from more than five-month lows in the previous session. Hong Kong’s Hang Seng index dropped by 0.2%.
The Caixin purchasing managers index data released on Thursday showed an unexpected contraction in China’s manufacturing sector, following a similar trend observed in the government’s PMI data the day before.
The Caixin PMI was particularly concerning as it had previously painted a more positive picture of China’s manufacturing sector in 2024. However, Thursday’s data raised worries about a broader slowdown in the sector.
While weak PMIs and positive comments from Beijing had fueled expectations for more stimulus—partially sparking Wednesday’s rebound in Chinese markets—continued caution over an economic slowdown kept investors wary of Chinese stocks.
Broader Asian markets were slightly positive, following the overnight gains on Wall Street.
Australia’s ASX 200 rose by 0.4%, briefly reaching a record high of 8,148.70 points after soft inflation readings from the country triggered a rally on Wednesday.
South Korea’s KOSPI increased by 0.4%, with local chipmaking stocks mirroring gains in their U.S. counterparts. Taipei shares of TSMC (TW:2330) rose nearly 2%.
Futures for India’s Nifty 50 index indicated a flat opening, as the index struggled to surpass the 25,000-point mark.
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