Asia report: Markets fall as BoJ holds rates, Fed cuts

Asia-Pacific markets retreated on Thursday as investors digested the US Federal Reserve’s cautious outlook after its latest rate cut, and a decision by the Bank of Japan to maintain its policy rate.

A Wall Street sell-off added to the negative sentiment, with concerns over tightening monetary policy weighing on stocks across the region.

“Asian stocks saw a slight increase in a stable trading environment as investors prepared for the Federal Reserve's last policy decision of the year,” said TickMill’s Patrick Munnelly.

“The MCSI Asian regional stock index rose by 0.3% after a three-day decline, with gains in Hong Kong and mainland China balancing losses in Japan and Australia.

“Nissan's shares soared by as much as 24%, marking the largest increase since at least 1974, amid speculation that the struggling car manufacturer may be contemplating a merger with Honda, whose stock experienced a decline.”

Most markets lower as investors watch central bank developments

In Japan, the Nikkei 225 fell 0.69% to 38,813.58, while the Topix dipped 0.22% to 2,713.83.

Losses on Tokyo’s benchmark were led by Rakuten, which plunged 7.98%, alongside significant declines in Nitori Holdings and SoftBank Group, down 5.4% and 4.34% respectively.

The yen weakened sharply, with the dollar last 1.38% stronger on the Japanese currency to trade at JPY 156.94.

China’s markets were mixed - the Shanghai Composite eased 0.36% to 3,370.03, while the bgained 0.61% to close at 10,649.03.

Several stocks in Shanghai hit their daily limit, with Maoye Commercial, Xinjiang Youhao Group, and Ningbo Fuda all dropping over 10%.

In Hong Kong, the Hang Seng Index declined 0.56% to 19,752.51.

Key tech and consumer stocks, including Baidu and Zhongsheng Group Holdings, fell 4.16% and 4.12% respectively.

WH Group meanwhile dropped 3.63%.

South Korea’s Kospi 100 slumped 2.32% to 2,427.40, with heavy losses in KakaoPay, Netmarble Games, and SK Bioscience, which fell 7.44%, 5.8%, and 5.54% respectively.

In Australia, the S&P/ASX 200 shed 1.7% to 8,168.20, led by steep declines in Zip Co and Westgold Resources, which dropped 8.97% and 8.33%.

Vault Minerals also fell 5.8%, while the US dollar was last 0.48% weaker against the Aussie at AUD 1.6006.

Across the Tasman Sea, New Zealand's S&P/NZX 50 dropped 0.87% to 12,754.15, with Fletcher Building and Skellerup Holdings losing 3.83% and 3.13%, respectively.

The greenback retreated 0.64% from the Kiwi, changing hands at NZD 1.7669.

Oil prices showed little movement, with Brent crude futures last down 0.12% on ICE at $73.30 per barrel, while the NYMEX quote for West Texas Intermediate edged up 0.04% to $70.61.

Japan stands pat on interest rates as US Fed make quarter-point trim

In central bank action, the Bank of Japan held its benchmark interest rate steady at 0.25% on Thursday, defying expectations of a 25-basis-point hike from economists polled by Reuters.

The decision, made by an 8-1 vote with board member Naoki Tamura dissenting in favour of a hike, reflected the central bank’s cautious stance as it assesses the impact of exchange rate fluctuations and economic trends on prices.

The BoJ noted that uncertainties persist around Japan’s economic activity and inflation, with recent corporate behavior showing signs of rising wages and prices.

Bank governor Kazuo Ueda acknowledged concerns about the timing of rate hikes, cautioning that delays could necessitate more aggressive increases in the future.

However, with inflation advancing at only a moderate pace, he indicated a preference for a gradual approach to tightening.

Meanwhile, the US Federal Reserve reduced its federal funds rate by 25 basis points on Wednesday, bringing it to a range of 4.25% to 4.5%.

The widely expected move marked a full percentage point reduction from the peak policy rate.

Fed chair Jerome Powell emphasised a cautious approach to further cuts, citing the need to see tangible progress on inflation, which had remained stagnant on a 12-month basis.

The central bank’s latest projections suggested only two rate cuts in 2025, down from four forecasted earlier.

In Hong Kong, the Monetary Authority mirrored the Fed’s move, lowering its base rate by 25 basis points to 4.75%.

The city’s monetary policy aligns closely with the US, given the Hong Kong dollar’s peg to the greenback.

Reporting by Josh White for Sharecast.com.