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Asian stocks mixed before more rate cues, Japan dips on strong wage data

Published 06/04/2024, 11:00 PM
© Reuters.

Investing.com-- Asian stocks were a mixed bag on Wednesday as caution before more cues on interest rates kept investors to the sidelines, while Japanese markets fell sharply as strong wage data spurred fears of tighter monetary policy.

Regional stocks tracked some strength on Wall Street following mild overnight gains, as a swathe of weak U.S. economic data fueled bets on eventual interest rate cuts by the Federal Reserve.

U.S. stock futures rose slightly in Asian trade, although focus remained squarely on upcoming nonfarm payrolls data this week.

Japan’s Nikkei 225 slips as higher wages spur BOJ concerns 

Japan’s Nikkei 225 index fell 0.8% on Wednesday, while the broader TOPIX lost 1.2% after data showed average cash earnings in the country grew much more than expected in April.

Overall wage income of employees also rose, as the wage hikes won by Japanese unions earlier this year began to take effect. 

Stronger wages tie into the Bank of Japan’s forecasts for higher inflation in the coming months, which is expected to give the central bank more impetus to further tighten policy. 

To this end, the BOJ is also expected to begin scaling back its stimulative bond purchases at a meeting next week. But tighter Japanese monetary conditions present more headwinds for local stocks. 

Other sectors of Japan’s economy softened. Purchasing managers index data showed the services sector grew less than initially expected in May. 

Australian stocks shrug off weak GDP 

Australia’s ASX 200 rose 0.4% even as gross domestic product data showed the economy grew less than expected in the first quarter, amid pressure from high inflation and interest rates.

But the reading pushed up expectations that a cooling economy will give the Reserve Bank of Australia less headroom to raise interest rates further.

Still, RBA Governor Michele Bullock warned on Wednesday that sticky inflation could still invite more rate hikes this year. 

Indian shares set for more losses after election shock 

Futures for India’s Nifty 50 index pointed to a weak open, after the Nifty and the BSE Sensex 30 plummeted nearly 6% apiece on Tuesday.

Losses in Indian stocks were driven chiefly by early vote counting showing that the incumbent BJP party secured a substantially lower number of seats in India’s lower house, with the opposing Indian National Congress gaining ground.

The results, which were confirmed after the market close, were in contrast to market expectations for a sweeping BJP victory. 

Other Asian shares were a mixed bag. The tech-heavy KOSPI and Hang Seng indexes rose about 1% each, benefiting from some positioning in heavyweight technology stocks as Treasury yields fell.

Chinese stocks lagged, with the Shanghai Shenzhen CSI 300 and Shanghai Composite moving less than 0.2% around the flat line. Stronger-than-expected purchasing managers index data did little to improve sentiment.

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