Most Asian stocks faced a retreat on Monday due to concerns regarding the Israel-Haas conflict, which impacted risk sentiment. Japan’s Nikkei index took the lead in losses, coupled with apprehension ahead of crucial inflation data.
Israel-Hamas Conflict Causes Uncertainty
Markets remained tense over the Israel-Hamas conflict potentially spilling over into the broader Middle East region, as Israel geared up for a ground assault on the Gaza strip. However, U.S. Secretary of State Antony Blinken reassured that Arab states sought to prevent such a spillover.
Weak Risk Appetite and U.S. Interest Rates
Despite these developments, risk appetite remained weak, influenced by the fear of rising U.S. interest rates. This apprehension followed a stronger-than-expected inflation reading last week.
Nikkei 225 Slides with Tech Stocks
Japan’s Nikkei 225 experienced the most significant losses, declining by 1.9%, primarily impacting tech stocks. The index had seen strong gains recently due to expectations of a dovish Bank of Japan and the relative strength of Japanese firms. However, weakening risk appetite led investors to lock-in profits, with tech stocks facing the most substantial selling pressure.
Cautious Outlook for Japan’s Inflation Data
Investors also adopted a cautious approach ahead of Japan’s key inflation data for September, set to release later this week. Signs of persistent inflation could motivate the Bank of Japan (BOJ) to consider policy tightening.
Broader Asian Markets Decline
Other Asian markets also faced declines, with South Korea’s KOSPI dropping by 1%, and Australia’s ASX 200 falling by 0.2%.
India’s Nifty 50 Points to Positive Open
On a positive note, India’s Nifty 50 index futures pointed to a positive opening. This optimism followed data from the previous week indicating a reduction in consumer inflation for September. Wholesale inflation data for India is expected later on Monday.
Chinese Stocks Under Pressure
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes experienced declines of 0.6% and 0.4%, respectively, while Hong Kong’s Hang Seng index lost 0.1%.
China’s Focus on GDP and Rate Decisions
Sentiment toward China remained uncertain ahead of the release of third-quarter gross domestic product data, expected to reveal ongoing growth weaknesses. The People’s Bank of China is set to make decisions on key loan prime rates later in the week, and further rate cuts are anticipated as economic growth has slowed despite the easing of anti-COVID measures.
Concerns Persist for Asia’s Largest Economy
State media indicated that additional rate cuts by the People’s Bank of China were likely this year, given substantial economic growth slowdown, even as anti-COVID measures were lifted. Earlier October business activity data painted a bleak picture of Asia’s largest economy.