Investing.com-- Asian stocks fell sharply on Thursday with technology shares leading losses after the Federal Reserve projected a slower pace of interest rate cuts in 2025, presenting a tougher environment for risk-driven markets.
But Japanese markets trimmed some of their initial losses, as the yen weakened after the Bank of Japan kept interest rates steady in its final meeting for the year.
Regional stocks tracked an overnight tumble on Wall Street after the Fed cut rates by 25 basis points as expected, but flagged a substantially slower pace of rate cuts in the coming year.
Tech stocks bore the brunt of losses, as investors locked-in profits from a recent run-up in the sector. The NASDAQ Composite slid 3.6% in its worst day in nearly five months.
U.S. stock index futures were flat in Asian trade.
Japanese stocks trim losses as BOJ holds rates
Japan’s Nikkei 225 and TOPIX fell 0.5% each after losing over 1% earlier in the session.
Local markets trimmed their losses after the BOJ kept interest rates steady, signaling more caution over Japan's economic outlook and the path of inflation. The central bank said it expects inflation to pick up in 2025 and remain close to its 2% annual target.
The BOJ's move disappointed some investors holding out for a December hike, although the prospect of rates remaining stable in the near-term bodes well for Japanese stocks. The yen weakened after the BOJ's decision, which also benefits export-oriented sectors.
The BOJ had raised rates twice earlier in 2024, marking a historic shift away from nearly a decade of ultra-loose monetary policy. Governor Kazuo Ueda has also signaled that the central bank will raise rates further, although the timing of the move remains unclear.
Asian tech slumps on Fed jitters, Micron weakness
Tech-heavy bourses were by far the worst performers in Asia, tracking steep overnight declines in their U.S. peers.
South Korea’s KOSPI index slid 1.7%, with sentiment towards the country remaining fragile amid increased political turmoil after President Yoon Suk Yeol was impeached over an unsuccessful attempt to impose military rule.
Memory chip making giants SK Hynix Inc (KS:000660) and Samsung Electronics Co Ltd (KS:005930) were the biggest weights on the KOSPI, losing 3.8% and 2.7%, respectively. The two tracked a 16% slump in U.S. peer Micron Technology Inc (NASDAQ:MU), after the chipmaker’s quarterly revenue guidance largely missed expectations. The miss raised questions over just how resilient artificial intelligence demand remained, especially amid growing global economic headwinds.
Losses in tech and chipmaking stocks pulled Hong Kong’s Hang Seng index down 1%.
Chinese markets also retreated, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes losing 0.4% and 0.7%, respectively. But bigger losses in Chinese stocks were mitigated by optimism over Beijing’s plans for more fiscal spending in 2025.
Australia’s ASX 200 fell 1.8%, while Singapore’s Straits Times Index lost 0.2%.
Futures for India’s Nifty 50 index pointed to a mildly positive open, with the index set for some relief after clocking three days of steep losses.