Investing.com-- Most Asian stocks retreated on Wednesday as risk aversion remained high before the Federal Reserve’s final meeting for the year, with a sticky U.S. inflation report adding to uncertainty over the central bank’s outlook.
Concerns over weak economic growth in China also continued to weigh, with local stocks logging sustained losses after data earlier this week signaled a deepening disinflationary trend in the country.
China’s Shanghai Shenzhen CSI 300 was among the worst performers for the day, down 1% and trading just above a five-year low, while the Shanghai Composite lost 0.6%.
Losses in mainland stocks pulled Hong Kong’s Hang Seng down 1%.
Chinese disinflation worsened in November, recent data showed, ramping up concerns over an extended economic slowdown in Asia’s biggest economy. The inflation reading also came after a string of other middling readings for November.
Markets took little support from Chinese officials promising more stimulus measures, as senior Communist Party officials called for more fiscal expenditure and supportive policies.
Broader Asian markets were largely subdued, as investors hunkered down before the Fed meeting. Data showing a slight uptick in U.S. inflation brewed more uncertainty over just when the central bank could begin trimming rates in 2024.
But markets remained convinced that the Fed will keep rates on hold later in the day. This notion offered some relief to Asian markets, as did a strong overnight close on Wall Street.
Japan’s Nikkei 225 rose 0.5%, extending gains into a third straight session amid growing conviction that the Bank of Japan will maintain its ultra-loose policy for longer.
Australia’s ASX 200 rose 0.4%, with shares of healthcare provider Sigma Pharmaceuticals Ltd (ASX:SIG) rallying 50% after it agreed to a merger with Chemist Warehouse Group.
South Korea's KOSPI fell 0.5%, while Indonesian stocks led declines in Southeast Asia with a 0.6% drop.
Growing bets on a less hawkish Fed in 2024 drove stellar gains in Asian stocks over the past month. But these bets will now be tested later on Wednesday, with the central bank largely expected to signal its outlook for 2024.
Indian stocks retreat from record highs as inflation rises
India’s Nifty 50 index opened slightly weaker on Wednesday, retreating further from record highs earlier this month.
Data on Tuesday showed Indian CPI inflation rose sharply in November, coming in line with a warning from the Reserve Bank of India over a resurgence in inflation. The rise was driven chiefly by higher food prices.
Higher inflation presents some risk towards the Indian economy, which is the fastest growing major economy in the world. But optimism over the economy, coupled with the increasing likelihood of a reelection for the ruling BJP party, were the key drivers of an Indian stock rally this year.
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