BANGKOK– Stocks fell in Asia on Tuesday, with Hong Kong’s benchmark down nearly 2%, as jitters over Chinese markets dented confidence in the region.
US markets were closed on Monday, depriving investors of signals from overnight trading. Early on Tuesday the future for the S&The P 500 was 0.4% lower, and the Dow Jones Industrial Average was 0.3% lower.
Tokyo’s Nikkei 225 index fell, snapping a new year winning streak that took the index to a 34-year high. It fell 0.7% to 35,645.18.
The dollar weakened against the Japanese yen even as a former central bank official said the Bank of Japan is preparing to end its long-standing negative interest rate policy. The dollar bought 146.18 yen, up from 145.75 late Monday and the highest level in more than a month.
The question of when and how the BOJ could break away from the more than decade-long extreme monetary easing, which has kept interest rates at minus 0.1%, has been hanging over the market for months. Speculation about the strategy change plan has flared, especially after the Federal Reserve and other central banks sharply raised interest rates to help extinguish inflation as economies recovered from the shocks of the pandemic.
Hong Kong’s Hang Seng lost 1.9% to 15,904.27 and the Shanghai Composite index fell 0.6% to 2,868.30.
Investors sold shares of technology and real estate companies. Online food delivery company Meituan fell 3.2% and games company Tencent lost 2.7%. Financially troubled property developer China Garden Holding lost 5.6% and Sino-Ocean Group Holding fell 8.1%.
China will provide an update on Wednesday on its economy, which economists say will post annual growth of 5.3% in the final quarter, up from 4.9% in July-September.
Most forecasts indicate growth in the world’s second-largest economy will slow this year as Beijing continues to grapple with a real estate crisis and tepid consumer demand. IMF head Kristalina Georgieva warned in an interview with CNBC on Monday that unless China implements reforms to boost spending, the country could face a “significant decline in growth rates that will fall below 4%.”
Elsewhere in Asia, South Korea’s Kospi fell 0.7% to 2,508.40 and the S&Australia’s P/ASX 200 lost 1.2% to 7,410.10.
European markets had a gloomy start to the week.
Germany’s DAX lost 0.5% to 16,622.22 as the government reported the economy would shrink 0.3% in 2023 from a year earlier. The CAC 40 in Paris lost 0.7% to 7,411.68. Britain’s FTSE 100 lost 0.4% to 7,594.91.
In the US, shares have been racing towards records for months, causing the S&P500 is within 0.3% of its all-time high, on hopes that inflation cools enough for the Federal Reserve to cut rates several times this year.
Easing interest rates and yields eases pressure on the economy and financial system, while investment prices rise.
Traders are largely betting that the Fed will cut its key interest rate six or more times through 2024. That would be a much more aggressive course than the Fed itself has hinted. It even warns that it could raise rates even further if inflation does not continue to trend convincingly towards its 2% target. The federal funds rate is already at its highest level since 2001.
In other trading, a barrel of U.S. crude lost 11 cents to $72.57 in electronic trading on the New York Mercantile Exchange. On Monday, the price rose 66 cents to $72.68.
Brent crude, the international standard, rose 14 cents to $78.29 a barrel.
The euro fell from $1.0952 to $1.0916.