Asian stocks grapple with economic concerns, Nikkei slumps

Asian stocks grapple with economic concerns, Nikkei slumps

Asian stocks faced challenges on Tuesday as apprehensions surrounding weak economic indicators impacted investor sentiment. Japanese stocks experienced the most significant decline as they retreated from their highest levels in 33 years.

Disappointing manufacturing data from major economies, including the United States, Germany, and China, contributed to the prevailing cautiousness, heightening worries about a slowdown in global economic growth.

Furthermore, anxieties regarding potential interest rate hikes weighed on regional stocks, ahead of the Reserve Bank of Australia's rate decision scheduled for later in the day.

Uncertainty looms over RBA rate hike decision

Australia's ASX 200 index remained largely unchanged on Tuesday, as traders exercised caution in anticipation of the Reserve Bank of Australia's closely-watched interest rate decision.

While a slight majority of analysts predict a 25 basis point rate hike by the RBA, given the sustained inflation levels exceeding the central bank's target range, market observers are also preparing for the possibility of the central bank maintaining the current rates. This cautious stance is fueled by concerns about various aspects of the Australian economy, such as declining manufacturing output and the housing market, which have shown signs of deterioration under high interest rates.

Japanese stocks decline after reaching 33-year highs

The Nikkei 225 index fell by 1%, while the broader TOPIX declined by 0.7%, as both indexes retreated from their recent 33-year highs. The Nikkei was the worst-performing index in Asia for the day.

Although the Japanese economy demonstrated resilience, and the accommodative approach of the Bank of Japan propelled a two-month rally in local stocks, the momentum has slowed due to fears of deteriorating global economic conditions and rising interest rates in the United States.

Daiichi Sankyo (TYO:4568), a pharmaceutical manufacturer, experienced the largest decline on the Nikkei, with a 14% drop following disappointing results from a lung cancer drug trial conducted in partnership with the UK's AstraZeneca PLC (LON:AZN), which exhibited fewer benefits than anticipated.

Wider Asian markets remained subdued, with China's Shanghai Shenzhen CSI 300 and Shanghai Composite trading sideways. In contrast, Hong Kong's Hang Seng index rose by 0.5%, building upon strong gains from the previous session.

A private survey published on Monday revealed that China's manufacturing sector expanded at a slower pace in June compared to the previous month, further fueling doubts about the recovery of Asia's largest economy this year.

South Korea's KOSPI declined by 0.2%, while the Taiwan Weighted index inched up by 0.1%.

Indian stocks achieve record highs

Futures for India's Nifty 50 index, traded in Singapore, indicated a mildly positive opening for local stocks on Tuesday, following the Nifty and the BSE Sensex 30 closing at all-time highs on Monday.

Optimism regarding the Indian economy, substantial exposure to the technology sector, and increased foreign investments have been key drivers of the recent rally in Indian stocks.

Nevertheless, analysts cautioned that local stocks may witness a temporary pullback after experiencing significant valuation increases in a short period.