Asian equities decline, with Nikkei witnessing moderate profit-taking at 34-year peak

Tuesday saw a decline in most Asian equities, with Japan's Nikkei 225 falling as investors booked gains following an impressive surge and shifted their attention to important incoming economic data from China.

Few immediate trading clues were provided by a U.S. market holiday to regional markets, but risk appetite remained brittle due to worries about a rise in military activity in the Middle East.

A few regional indices were also impacted by weakness in the commodity markets.

After climbing for the previous six days, when the index reached highs not seen since the 1990s big speculative bubble burst, the Nikkei 225 fell 0.4%. The index held steady at over 35,500 points, and analysts speculated that there may be further upside to this move.

The Japanese producer price index inflation continues to be sluggish, according to data released on Tuesday. This suggests that the Bank of Japan is not under any pressure to change its ultra-dovish attitude.

This Friday's consumer price index inflation in Japan is anticipated to decline even further in the direction of the BOJ's 2% annual objective. The Japanese stock market's surge through 2023, which saw the Nikkei add over 30%, was mostly driven by a dovish BOJ.

Tuesday witnessed a modest rebound in China's Shanghai Shenzhen CSI 300 and Shanghai Composite indices, which had recently dropped to multi-year lows.

In 2023, the two indexes were among the worst-performing Asian stock exchanges due to the lack of evidence of a post-COVID economic rebound.

However, the huge losses also attracted bargain hunters to Chinese marketplaces. According to Bloomberg, a number of fund managers, such as Bell Asset, BlackRock, and JPMorgan, were considering investing in local companies after a protracted sell-off drove their prices down to what appeared to be reasonable levels.

The focus now shifted to the fourth-quarter Chinese GDP figures, which were scheduled for release on Wednesday. The government's 5% yearly growth objective is predicted to have been surpassed, however primarily because of a low 2022 base of comparison.

December numbers for retail sales and industrial production are also available.

In Europe, the economic front is rather quiet now that the UK has released its average earnings index data and Germany’s CPI comes in as expected.

German Buba President Nagel is scheduled to speak at 11:10 GMT, followed by Bank of England’s Governor Bailey at 15:00 GMT.

(Sources: investing.com, reuters.com)