Asian markets turned bearish on Thursday as investors eased off the gas following a prolonged rally driven by expectations of interest rate cuts by the Federal Reserve in the coming year. Recent data indicating a slowing inflation rate and a softening job market, coupled with positive economic indicators, fueled the market optimism. However, investors pulled back amid uncertainty about the Fed’s future decisions.
On Wednesday, US consumer confidence exceeded forecasts, and home sales rebounded from a 13-year low. The upcoming release of the personal consumption expenditures (PCE) price index on Friday, considered by the Fed in decision-making, has become pivotal for market dynamics. The Fed’s indication of potential rate cuts in 2024 led to a buying frenzy, but officials are now attempting to manage expectations.
Stephen Innes of SPI Asset Management noted that the PCE figures could influence market dynamics into the year-end and beyond. An upside surprise might reinforce the Fed’s efforts against rate cut expectations, while a downside surprise could challenge expectations of a rate cut in March.
Despite positive data, investors took profits, leading to a pullback in the market. Cameron Dawson of Newedge Wealth cautioned about the market being overbought and extended, emphasizing the potential for a pullback. Wall Street’s major indices experienced declines, and Asian markets, including Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Taipei, Jakarta, and Manila, followed suit. Singapore and Wellington saw marginal gains.
In corporate news, Toyota shares dropped nearly four percent in Tokyo after its subsidiary, Daihatsu, announced a suspension of shipments for all car models in Japan and abroad due to safety test irregularities. The world’s largest carmaker later revealed a recall of around a million Toyota and Lexus vehicles in the United States over concerns about their airbag systems.
