Most Asia Pacific stocks edged down on Monday morning. Japan’s Nikkei 225 index was hovering near its lowest level in four months. The index fell by more than 3.60% extending its last week’s losses after Fed’s hawkish tone. Australia’s ASX 200 declined by more than 1.89% while Hong Kong’s Hang Seng index slipped by more than 1.21%. Mainland Chinese stocks, Shanghai composite and Shenzhen Component almost traded flat.
Nikkei 225 Concerns
The Nikkei 225 index hit its largest dive in almost four months on Monday. The index has been on a downward trend ever since the Federal Reserve’s hawkish comments on the interest rate decision. Electronics and chemical companies were the biggest drags in the index.
The Nikkei 225 index jumped 82% from its corona pandemic sell-off low to a 30-year high in February. The surge saw many investors purchase and invest in heavy Japanese stocks amid economic reopening. However, the index has been on a decline ever since amid late vaccination rollout and concerns about the Tokyo Olympics.
US stocks and long-term treasury yields ended the week lower than expected on Friday. This was after the Fed announced that they would introduce two rate hikes in 2023. This would be a year earlier than expected.
Despite the central bank’s decision to keep its interest rates and monthly bond purchases unchanged, US stocks as well as commodity prices have been on track for a decline. However, the US dollar has been gradually increasing ever since.
St Louis Fed President, James Bullard, stated that the current inflation rise may push interest rate hikes to start as early as next year. Investors will be waiting for Jerome Powell’s speech on Tuesday. He will be expected to brief the House of Representatives’ committee on the Fed’s asset purchases programs and its Covid-19 emergency lending.
AMP Capital head of investment strategy, Shane Oliver, stated that:
“The shift toward tapering and a pull forward in first rate hikes may cause bouts of nervousness in markets with shares vulnerable to a decent correction.”
Nikkei 225 Movers
Kawasaki Kisen Kaisha was the best performer in the Nikkei 225 index. The company gained 1.44% in its stock earnings. Chiyoda Corp was also among the top performers after a 1.40% gain in its share prices. Other top performers were ANA Holdings and Eisai which gained more than 0.88%.
T&D Holdings led the losses in the index with a 6.52% decline. Other laggards include Tokyo Tsusho Corp and Shin-Etsu Chemical. Each declined by 6.40% and 6.08% respectively.