©Reuters.
Investing.com — Strong labor market data and relatively hawkish comments from Federal Reserve Chairman Jerome Powell led traders to further price in expectations for interest rate cuts early this year, with most Asian stocks trading higher on Monday. has fallen.
The negative mood was fueled by a pessimistic view of China, as activity in the country's services sector was shown to be weaker than expected in January. As a result, domestic stocks continued to decline, with the index falling 1% and 2.4%, respectively.
The losses were mainly due to weakness in technology and real estate stocks, with both indexes trading at five-year and four-year lows.
The Chinese market has been forced into a long-term slump, having significantly underperformed its global peers until 2023 amid persistent concerns about the country's slowing economic growth. Promises of further stimulus from the government provided limited support for sentiment.
The announcement, scheduled for later this week, is expected to be less upbeat ahead of the Lunar New Year holiday.
Concerns over China and a prolonged rise in US interest rates led to most Asian markets falling. Australia's stock fell 0.9% on profit-taking after hitting a record high last week.
The data showed Australia's better-than-expected December performance was underpinned by some resilience.
However, investors were reluctant on Australian shares ahead of Tuesday's trading, when the Reserve Bank of Australia (RBA) was widely expected to keep interest rates on hold. However, the central bank is also expected to hint at raising long-term interest rates as inflation continues.
South Korea's stock fell 1.3% after the country's financial watchdog launched a crackdown on what it deemed irresponsible risk management.
Hong Kong indexes fell 0.7% and Indian index futures suggested a weak open under pressure from large tech stocks.
Powell comments that prospects for interest rate cuts fade due to shock in non-farm payrolls
Hawkish comments late Sunday rattled risk sentiment. Powell said in an interview with CBS 60 Minutes that the recent economic recovery has given the central bank more room to keep rates on hold and that the central bank will take a “cautious” approach to cutting rates.
Powell's comments came after a much better-than-expected report in January showed the labor market remained strong. The numbers led traders to further reduce their expectations for an early rate cut by the Fed.
The central bank signaled last week that it had no plans to begin cutting rates aggressively this year, given the strength of the U.S. economy and persistently high inflation.
A prolonged period of high U.S. interest rates bodes poorly for Asian markets, given that they make high-yielding, risky assets less attractive.
Still, Powell said most members of the rate-setting committee still expect some rate cuts this year.
Japan was one of the few gainers in Asia, buoyed by data showing the country's services sector grew faster than expected in January.
Despite the contraction in manufacturing activity over the past year, the services sector has consistently supported Japan's economy.
After significantly outperforming its global peers from 2023 to early 2024, the Nikkei 225 stock average continues to set its sights on a 34-year high.
