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Asia stocks mostly down as Fed in focus


Nikkei 225 dropped 0.45%, KOSPI slid 1.63%, ASX 200 was down 0.39%, Hang Seng Index dropped 1.26%, Shanghai Composite was down 0.58% while the Shenzhen Component edged up 0.09%

Asia Pacific stocks were mostly down on Monday morning, with a potentially tighter U.S. Federal Reserve monetary policy weighing on sentiment. Investors also digested inflation data from Japan and Australia.

Japan’s Nikkei 225 was down 0.45% by 2:08 AM GMT. The country’s manufacturing purchasing managers index (PMI) for January was 54.6, and the country also released its services PMI.

South Korea’s KOSPI slid 1.63%.

In Australia, the ASX 200 was down 0.39%. Australia released its own manufacturing and services PMIs, which were at 55.3 and 45, respectively. The consumer price index is due on Tuesday.

Hong Kong’s Hang Seng Index dropped 1.26%.

China’s Shanghai Composite was down 0.58% while the Shenzhen Component edged up 0.09%. Yu Yongding, a former member of the monetary policy committee of the People’s Bank of China, warned more government spending is needed to drive economic recovery as a looser monetary policy will not be enough.

With the past week being one of the worst for global shares since the onset of the COVID-19 pandemic, investors now await the Fed’s latest policy decision, which will be handed down on Wednesday. A key question is how a more hawkish Fed will impact fixed income, with U.S. Treasuries rallying after an initial fall at the beginning of the previous week. The benchmark 10-year yield edged up toward 1.77%.

There is also the risk that the Fed will tighten monetary policy more aggressively in 2022 than expected, Goldman Sachs Group Inc. economists warned.

There is ‘likely a longer-term rotation toward value stocks measured in quarters, not weeks’ unfolding, Evercore ISI chief equity and quantitative strategist Julian Emanuel said in a note.

Emanuel said: Investors should retain a balanced view, staying patient in committing new capital to equities.

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