H.G Markets :

Asian shares experienced significant declines on Wednesday, following a similar trend seen on Wall Street due to concerns sparked by higher-than-expected U.S. inflation data. The Japanese Nikkei 225 dropped by 0.8% as investors decided to take profits after reaching 34-year highs, especially in the technology sector where steep declines were recorded due to extended profit-taking activities.

On Wall Street, indexes also fell from their record highs in overnight trading, with the U.S. consumer price index (CPI) indicating hotter-than-expected inflation figures for January. This reinforced warnings from Federal Reserve officials that persistent inflation could lead the central bank to maintain higher interest rates for a longer period.

In Asian trading, Dow Jones Futures declined by 0.1%, while S&P 500 futures and Nasdaq 100 Futures remained relatively stable. Among Asian stock exchanges, tech-heavy indexes experienced the most significant losses, reflecting the sector’s vulnerability to higher interest rates.

Despite the losses on Wednesday, the Nikkei 225 remained close to a potential record high above 38,000 points, with losses limited by expectations of a more accommodative stance from the Bank of Japan (BOJ). A senior BOJ official recently indicated that while the bank might raise interest rates this year, it would do so gradually, allowing local businesses to continue benefiting from a relatively low-interest rate environment.

The ultra-low interest rates in Japan were a significant factor driving the Nikkei’s impressive rally throughout 2023. However, notable losses were recorded among index heavyweights, including Softbank Group (-3.4%), Toyota Motor (-2.1%), Japan Tobacco (-3%), Nippon Steel (-4.5%), and Tokyo Marine Holdings (-3.6%).

On the positive side, some stocks managed to post gains, with Advantest rising by 2.7%, Screen Holdings by 3%, and Kawasaki Kisen by 3%. These movements reflect the ongoing volatility in the market as investors react to a combination of domestic and global factors influencing stock performance.