Asian Stocks Fall as Traders Await BOJ Decision: Markets Wrap

(Bloomberg) — 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.

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A gauge tracking the region’s benchmarks declined, led by Hong Kong and South Korean equities, which both fell over 1%. Tech stocks dropped following Nvidia Corp.’s decline in post-market trading after the firm unveiled its new AI chip.

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.

In Japan, stocks edged lower as BOJ watchers see a chance of authorities ending the negative rate 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 emphasize that this is going to be a highly gradual process, that they’re not rushing into anything.”

The Australian dollar fell 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 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.

Jam-Packed Week

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.”

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. Alphabet Inc. jumped as Bloomberg News reported Apple Inc. is in talks to build Google’s Gemini artificial-intelligence engine into the iPhone. In late hours, Nvidia Corp.’s chief Jensen Huang revealed new chips aimed at extending his company’s dominance of AI computing.

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.

Investors will be keenly focused on the US central bank’s projections — the dot plot — to gauge how many rate cuts policymakers are expecting to deliver this year.

Wall Street will listen carefully to any signs from Powell on the phase out of quantitative tightening, known as QT. While a handful expect the Fed to announce or even begin slowing the unwind of its balance sheet as early as May, others don’t see a tapering starting until the second half of the year.

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

Key events this week:

Reserve Bank of Australia rate decision, Tuesday
Bank of Japan rate decision, Tuesday
Germany ZEW survey expectations, Tuesday
European Central Bank Vice President Luis de Guindos speaks, Tuesday
US housing starts, Tuesday
Eurozone consumer confidence, Wednesday
Fed rate decision; Chair Jerome Powell holds news conference, Wednesday
Reddit’s IPO, Wednesday
ECB’s Christine Lagarde speaks, Wednesday
Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, Thursday
Bank of England rate decision, Thursday
US Conference Board leading index, existing home sales, initial jobless claims, Thursday
Nike, FedEx earnings, Thursday
Japan CPI, Friday
Germany IFO business climate, Friday
Atlanta Fed President Raphael Bostic speaks, Friday
ECB’s Robert Holzmann and Philip Lane speak, Friday