Asian stocks muted as markets await US payrolls for more rate-cut cues

Most Asian stocks moved little on Friday as they steadied after a weak start to the new year, although anticipation of key U.S. payrolls data and persistent concerns over China kept investors on edge.

Most regional markets were set to close lower for the week, after tracking losses in Wall Street over the first three trading days of 2024. The new year’s losses were driven by a mix of profit-taking and growing doubts over early interest rate cuts by the Fed.

Chinese markets continue to lag peers
Concerns over China also weighed on Asian markets, after ratings agency Fitch on Thursday downgraded the country’s four biggest state-backed asset managers.

Chinese stocks were the worst performers in Asia through 2023, and extended this underperformance into the first week of the new year.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes moved little on Friday, as did Hong Kong’s Hang Seng index. All three indexes were set to lose between 0.7% and 2.5% this week, severely lagging most of their Asian peers.

Asian stocks set for weekly losses after weak start to 2024
Broader Asian markets moved in a tight range, and were headed for weekly losses amid a mix of profit-taking and angst over the Fed.

Japan’s Nikkei 225 index rose 0.4% and was down 0.1% this week, as sentiment towards Japan was also rattled by a devastating earthquake in the country.

Australia’s ASX 200 added less than 0.1% and was set to lose 1.2% this week, as the index came off its highest level since mid-2021.

South Korea’s KOSPI fell 0.1% and was set to lose 2.7% this week- having come under pressure from losses in heavyweight technology stocks.

Indian stocks muted in anticipation of GDP estimates
Futures for India’s Nifty 50 index pointed to a flat open, although optimism over the Indian economy kept the index in sight of record highs.

A Reuters poll showed that markets expect the Indian government to project a higher gross domestic product rate for 2024, at around 7%. The National Statistical Office is set to release its first advance GDP estimates later in the day.

The Indian economy is the fastest-growing major economy over the past year- a trend that drove heavy buying into Indian markets.

Nonfarm payrolls awaited for more rate-cut cues
Markets were now focused squarely on key U.S. nonfarm payrolls data for December, due later in the day.

The reading is expected to show more cooling in the labor market, although whether the degree of cooling will be sufficient to convince the Fed into trimming interest rates early remains unclear.

Bets on early interest rate cuts by the Fed drove a stellar rally in Asian markets through December. But traders were now second-guessing whether the bank will cut rates by as early as March 2024.

The CME Fedwatch tool showed traders pricing in a 62.7% chance of a 25 basis point cut in March, down from the nearly 73% chance seen last week.