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Asian stocks fall as traders await BOJ decision: markets wrap

Asian stocks fall as traders await BOJ decision: markets wrap
A trader wears ashes for Ash Wednesday as they work on the floor of the New York Stock Exchange during morning trading on 14 February 2024 in New York City. (Photo: Michael M. Santiago/Getty Images)

Asian equities slipped before a Bank of Japan policy decision where authorities are likely to bring an end to the world’s last negative rates regime.

A gauge tracking the region’s benchmarks declined, led by tech stocks in Hong Kong and South Korean equities, which both fell over 1%. In Japan, shares were mixed as BOJ watchers see a chance of authorities exiting sub-zero rates on Tuesday, with the nation expected to enact its first interest rate hike in 17 years. 

The yen slightly weakened against the dollar amid a news report the BOJ is also poised to end its policy of guiding government bond yields — known as yield curve control. 

Bank officials are also considering ending their buying of exchange-traded funds and real estate investment funds, according to people familiar with the matter. Traders betting on the BOJ outcome boosted their positions in yen futures to the highest since 2007.

“First off, they’re going to engineer a dovish hike,” Yue Bamba, head of Japan active investments at BlackRock Inc., said on the BOJ on Bloomberg Television. “We expect that they’re going to be very careful in their messaging to not disrupt markets and not alarm markets, and emphasise that this is going to be a highly gradual process, that they’re not rushing into anything.”

Tech stocks in Asia dropped, following the losses of Nvidia Corp. in postmarket trading. The company on Monday unveiled new chips, aimed at extending his company’s dominance of artificial intelligence computing.

Contracts for US shares also pointed to losses. That followed Monday’s rebound on Wall Street ahead of a raft of other central-bank decisions this week from the US to the UK. The S&P 500 halted a three-day slide, the Nasdaq 100 rose 1% and a gauge of the “Magnificent Seven” tech megacaps climbed twice as much.

Regional markets are seeing pull back, which potentially could indicate some caution ahead of the Federal Reserve’s meeting, according to Marvin Chen, a strategist with Bloomberg Intelligence. “With the recent US inflation data, markets could be preparing for a more hawkish tone from the Fed,” he said.

The Australian dollar weakened marginally as the nation’s central bank is set to announce its rates policy on Tuesday. The Reserve Bank of Australia is widely expected to hold them at a 12-year high, with the economy showing signs of slowing further while unemployment trends higher.

Elsewhere, Treasuries were little changed in Asian trading. Yields on the two-year note hovered near 2024 highs on Monday as expectations for Federal Reserve rate cuts continued to erode. 

Investors in Asia will be closely monitoring China, where the top securities regulator said the defaulted developer at the heart of the nation’s real estate crisis falsely inflated revenue by more than $78-billion in the two years leading up to its failure. China Evergrande Group and its massive debt have become symbolic of the nation’s stuttering economy, particularly in its property and construction sectors.

Back in the US, Wall Street is gearing up for more insights on the Fed’s resolve to ease as central banks set policy for almost half the global economy. The week features the world’s biggest agglomeration of decisions for 2024 to date, including judgments on the cost of borrowing for six of the 10 most-traded currencies.

“It’s a jam-packed week of central bank meetings,” said Win Thin and Elias Haddad at Brown Brothers Harriman. “There are sure to be some surprises and so today’s calm is likely to give way to greater volatility ahead.”

Goldman Sachs Group Inc. economists led by Jan Hatzius changed their forecast to call for three quarter-point Fed cuts this year — instead of four. The change, which brings the forecast in line with the median forecast policymakers made in December, is “mainly because of the slightly higher inflation path,” they said.

In other markets, oil held a gain, with the impact of Ukrainian drone attacks on Russian refineries and OPEC+ supply cuts in focus. Gold traded steady after rising in its previous session.

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