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Asian Stocks Grapple with Rate-Cut Uncertainty and China's GDP Figures; Nikkei Hits New High

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Image credit: Adam Śmigielski

The Asian stock market experienced a mixed day as Federal Reserve officials' comments dampened expectations for early interest rate cuts, while China's economic growth figures slightly missed the mark. Amidst this landscape, Japan's Nikkei emerged as a standout performer, reaching new highs on optimism over monetary conditions.

China's GDP Figures and Market Response

China's fourth-quarter gross domestic product (GDP) grew at 5.2%, slightly below market expectations, leading to declines in Chinese stocks. The Shanghai Shenzhen CSI 300 and Shanghai Composite indexes dipped between 0.7% to 1%. Hong Kong's Hang Seng index mirrored the losses, falling 3% due to weakness in heavyweight technology shares.

While the annual GDP growth beat Beijing's target at 5.2%, analysts noted that a significant portion of this growth was influenced by a lower base in 2022. The data revealed ongoing challenges for China's economy, impacting broader Asian markets due to China's role as a key trading partner.

Fed's Impact on Asian Tech Stocks

Federal Reserve Governor Christopher Waller's comments, dismissing the need for early interest rate cuts, triggered concerns and a sell-off in Asian tech stocks. South Korea's KOSPI and Hong Kong's Hang Seng saw losses between 2% and 3%. Indian markets were also poised for weakness as traders adjusted rate-cut expectations.

Japanese Stocks Reach New Highs

In contrast to the broader Asian trend, Japanese stocks stood out positively. The Nikkei 225 rose 0.4%, briefly crossing the 36,000 point mark to hit a new 34-year high. The TOPIX index also gained 0.6%, reaching a 34-year high above 2,500 points. Optimism over Japan's monetary policies, with expectations that the Bank of Japan will maintain a dovish stance, drove the gains.

Outlook Amid Rate-Cut Uncertainty

Uncertainty looms over Asian markets as traders recalibrate expectations regarding interest rate cuts. The Federal Reserve's cautious stance and China's economic challenges add complexity to the market landscape. Japan's resilience, backed by dovish monetary expectations, offers a contrast within the region.

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