Asian shares close lower amid anticipation of interest rate hikes

Asian stock market closed slightly lower in the second trading session this week amid anticipation of interest rate hikes by several central banks and publications of new economic data.

The MSCI's broadest index of Asia-Pacific — which tracks shares in the region except for Japan — fell by 1.1 percent. This month, the index has gained 9.9 percent and is on track for its best January result since 2012.

In Japan, the Nikkei index dropped 0.23 percent, giving up the gains obtained in the previous trading session. Several Japanese companies contributing to the loss were SoftBank Group, Uniqlo and Advantest.

China's CSI300 index — which tracks the country's blue-chip companies — was down almost one percent on Tuesday afternoon local time. In the previous trading session, CSI300 hit a six-month high.

This month, China's economic activity has recovered rapidly after the country managed to curb the new wave of COVID-19 spread faster than predicted. Its purchasing manager's index's latest economic data showed significant growth from 47.0 to 50.1 in December.

Multibank Review
Visit Site
eToro Review
Visit Site
4.8/5 Review
Visit Site

Despite the improved economic indicator, Chinese investors remained cautious. Analysts said they would look for additional signs of economic recovery in the coming days.

Hong Kong's Hang Seng index fell by 1.23 percent in the same period. The day before, it dropped by 2.7 percent. Despite the consecutive losses, the index remains on track to post its best January result since 1989.

In Europe, pan-region Euro Stoxx 50 futures went down by 0.48 percent. German DAX futures also posted a 0.47 percent plunge, while Britain's FTSE futures recorded a 0.29 percent drop.

Analysts said global investors maintained a cautious trading stance in anticipation of interest rate hikes and new inflation data. The Federal Reserve, Bank of England and European Central Bank will hold their respective rate-setting meetings this week.

Investors expect a more dovish rate hike by the American central bank. The current consensus is a 25-basis-points rate hike in February, followed by another similar hike size in March.

However, the BoE and ECB have repeatedly asserted that they will maintain hawkish monetary policies to curb high inflation rates. Both banks are expected to raise the benchmark interest rates by 50 basis points, respectively.

Several major companies, including Apple and Alphabet, are also due to report their earnings this week. Tech shares were among the biggest weights of the stock market last year.

These tech companies conducted mass layoffs in recent weeks. Investors can see how these tech layoffs impact the U.S. job market through job reports that will be published this week.

"It's a big week for both central banks and U.S. equities, with ... some of the household names due to make earnings announcements that will provide a micro overview of the macro economy," financial service firm ANZ reported.

"We expect a 25 bps (U.S.) rate rise and anticipate that the Fed will caution against an early pause in the tightening cycle .... Risk appetite could be vulnerable to a correction."

Wall Street's major indexes sink Monday

Major indexes on Wall Street plummeted on Monday, with tech companies contributing the most to the loss.

The Dow Jones closed at 33,717.09, falling by 0.8 percent. The S&P 500 — which measures large U.S. corporations — fell by 1.3 percent to 4,017.77. NASDAQ posted the biggest loss by percentage at two percent to close at 11,393.81.

Despite the drop in stock value, S&P remains on track to record its biggest January gain in four years.

While the stock market declined on Monday, the U.S. dollar index slightly improved from the previous day to 102.29.