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Asian stocks dip, Nikkei tumbles on BOJ, inflation jitters

Published 22/09/2023, 03:54
© Reuters.

Investing.com-- Most Asian stocks moved in a flat-to-low range on Friday as markets continued to fret over rising interest rates, while Japan’s Nikkei tumbled amid uncertainty before a Bank of Japan meeting. 

Regional markets were still reeling from a more hawkish than expected tone struck by the Federal Reserve this week, as the central bank warned that interest rates will remain higher for longer. 

The European Central Bank and Bank of England also offered similar warnings, denting risk-driven assets across the globe. Higher rates limit the flow of foreign capital into Asia, presenting a weak outlook for local equities.

BOJ up next in central bank queue as inflation rises 

The Nikkei 225 index fell as much as 1%, while the TOPIX shed 0.8% as markets awaited the conclusion of a BOJ meeting on Friday.

The central bank is widely expected to maintain its negative interest rates for now. But any cues on a potential move away from negative rates will be closely watched, after Governor Kazuo Ueda said such a move was being considered.

Ueda said that wage growth and inflation were close to reaching levels that the BOJ is comfortable with, which is likely to invite a pivot by the central bank. 

Data on Friday showed that Japanese consumer price index inflation grew slightly more than expected in August, while a core reading remained at over 40-year highs. 

A pivot by the BOJ will mark an end to nearly a decade of easy monetary policy enjoyed by Japanese stocks, and is also likely to send ripples across broader markets.

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Preliminary data released on Friday also showed that Japan’s manufacturing sector slowed further in September. 

Among other Asian markets, Australia’s ASX 200 fell 0.8%, pressured by losses in mining stocks as commodity prices retreated. The ASX was also one of the worst performers this week, down 3.7%. 

South Korea’s KOSPI lost 0.3%, while futures for India’s Nifty 50 index pointed to a positive open after the index plummeted from record highs earlier this week. Sentiment towards the Nifty was also battered by a worsening diplomatic spat between India and Canada, over the alleged killing of a Sikh secessionist leader. 

Chinese stocks were among the few outliers for the day, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes up 0.6% and 0.4%, respectively. Hong Kong’s Hang Seng also added 0.6%, with heavyweight technology stocks recovering from steep losses seen earlier this week.

But Chinese markets were still trading lower for the week, hit by growing impatience over more stimulus measures from Beijing. The People’s Bank kept its loan prime rates on hold, as expected, earlier in the week. 

In Southeast Asian markets, Philippine and Indonesian stocks crept higher after their respective central banks kept interest rates on hold, as expected, on Thursday. 

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