Asia stocks fall ahead of US Fed rate decision, China shares drop on weak data

Most Asian stocks fell on Monday ahead of a U.S. Federal Reserve interest rate decision this week, while Chinese shares declined as weaker-than-expected retail sales data raised fresh concerns about the world’s second-largest economy.

The U.S. Fed is set to cut its key interest rate by 25 basis points on Wednesday. However, markets were cautious about the Fed’s long-term rate trajectory as inflation has remained a major concern.

US stock index futures were muted in Asian trade, with Wall Street also entering a holding pattern below record highs before the Fed meeting.

Chinese shares reverse course after retail sales data
China’s Shanghai Composite erased early gains to inch 0.1% lower, while the Shanghai Shenzhen CSI 300 index declined 0.4%. Hong Kong’s Hang Seng index fell 0.8%.

Chinese industrial production grew as expected in November as recent stimulus measures from Beijing supported business activity, data showed on Monday.

However, retail sales fell short of forecasts, reflecting ongoing weakness in consumer spending.

The soft retail numbers dampened sentiment across Asian markets, reaffirming fears of an uneven recovery in China’s economy while reinforcing caution before this week’s Fed meeting.

Asia stocks down ahead of Fed, BOJ meeting
Japan’s Nikkei 225 was largely unchanged, and TOPIX inched lower ahead of the Bank Japan’s policy meeting this week.

The BOJ is expected to maintain its current interest rates this week, as officials seek more time to evaluate global risks and the outlook for wage growth in 2024. This is in contrast to earlier expectations of a hike.

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Other data showed that Japan’s factory activity shrank for a sixth straight month on lackluster demand while the service sector grew further in December.

South Korea’s KOSPI index was largely unchanged after the country’s president Yoon Suk Yeol was impeached in a second vote by the opposition-led parliament on Saturday, over his attempt to impose martial law in the country.

South Korea’s finance ministry vowed on Sunday to continue to swiftly deploy market stabilizing measures as needed to support the economy after the impeachment.

Globally, investors were cautious ahead of the Fed meeting. The Fed is expected to lower interest rates by 25 basis points. ohwever, sticky inflation figures released last week have clouded the central bank’s long-term rate outlook.

Elsewhere, Australia’s S&P/ASX 200 lost 0.3%, while Indonesia’s Jakarta Stock Exchange Composite Index dropped 0.9%.

India’s Nifty 50 Futures indicated a positive open on Monday, while Malaysia’s FTSE Malaysia KLCI index edged up 0.2%.