Uncertainty around rate cuts and China's mediocre GDP hurt Asian equities overnight

In the overnight session, most Asian equities dropped as Federal Reserve officials played down hopes for early interest rate reduction, while China's economic growth data mainly disappointed investors.

However, there was positive movement in Japanese stocks, with local indices momentarily reaching fresh 34-year highs on expectations that the nation's ultra-loose monetary policy will continue.

China’s fourth-quarter gross domestic product increased at a little slower rate than anticipated, 5.2%, which caused the country’s Shanghai CSI 300 and Shanghai Composite indices to drop between 0.7% and 1%.

The Hang Seng was down 3% due to losses in mainland equities and a decline in heavyweight technology firms.

With an annual GDP growth rate of 5.2%, Beijing exceeded its 2023 target of 5%. However, the majority of this rise was caused by a 2022 lower comparative base.

The largest economy in Asia continued to struggle to recover from the COVID-19 drops in growth, as seen by the data released on Wednesday. The challenges included low consumer spending, slow private investment, and a protracted problem in the real estate industry.

The day's weakest performers were regional technology companies, with losses in industry heavyweights sending Hong Kong's Hang Seng and South Korea's KOSPI down 3% and 2%, respectively.

After Fed Governor Christopher Waller stated that the bank did not need to lower interest rates early given the recent robustness of the U.S. economy, traders were observed pricing in a lesser possibility of a rate drop in March 2024.

His remarks precipitated a precipitous retreat on Wall Street, extending into Asian trading.

The only stock markets that saw positive trade on Wednesday were Japanese ones, as hopes for loose monetary policy more than overcame challenges from the US and China.

The primary factor driving inflows into Japanese stocks was anticipation that the Bank of Japan, which stands out among its international counterparts in maintaining loose monetary policy, would stick to its ultra-dovish posture in the foreseeable future.

The BOJ appeared to be under minimal pressure to contemplate tightening policy, according to soft producer price index data that was announced earlier this week. This is likely to be confirmed by consumer price index data that is slated to be issued this Friday.

(Sources: investing.com, reuters.com)