Asian markets slowed further ahead of more rate cues

In anticipation of more clues on U.S. inflation and interest rates, the majority of Asian equities stayed in a narrow range on Thursday. Meanwhile, losses in Japanese markets continued for a fourth straight day due to ongoing concerns about the Bank of Japan.

Wall Street's lead-in for regional equities was mediocre as investors continued to process a higher-than-expected figure on consumer inflation and profited from heavyweight technology firms.

With attention now shifting to the impending producer price index and retail sales data, U.S. futures were flat in Asian trading.

On Thursday, the Nikkei 225 fluctuated between flat and low, continuing its losing streak into the fourth session in a row. With both indices reaching all-time highs last week, there was prolonged profit-taking.

The main reason for the selling of Japanese equities was the rising belief that the BOJ was about to abandon its negative interest rate and yield curve management policies and that it would even do so at a meeting the following week.

In the upcoming months, Japanese inflation is expected to stay substantially over the BOJ's 2% annual target due to sticky inflation statistics and rising wages. This pattern is likely to prompt an interest rate hike by the central bank.

Almost 10 years of abundant liquidity enjoyed by Japanese markets would cease with any tightening of monetary policy, which is exactly what has caused phenomenal advances in local equities over the last two years.

Wider Asian markets fluctuated between flat and low as the tech rally abated and as the impending release of fresh loan data from China also became apparent.

China's Shanghai Shenzhen CSI 300 and Shanghai indices were trading close to four-month highs on Thursday, suggesting that the rebound surge may have petered out. Most investors continued to be pessimistic about China's economy recovering in 2024, particularly after Beijing announced a lacklustre growth objective for the year.

Earlier this month, Indian equities had risen to all-time highs on confidence about the rapidly expanding economy. However, when worries about longer-term interest rate increases grew, investors began to sell at almost all-time highs.

(Sources: investing.com, reuters.com)