Asian stocks slammed by CPI shock, Nikkei retreats from 34-year high

Investing.com-- Most Asian shares tumbled on Wednesday, tracking an overnight decline on Wall Street after sticky U.S. inflation data spurred renewed concerns over higher for longer interest rates.

Japan’s Nikkei 225 fell 0.8% as investors locked-in profits at 34-year highs, while technology-heavy indexes clocked steep declines on extended profit-taking in the sector. 

Wall Street indexes tumbled from record highs in overnight trade, as U.S. consumer price index (CPI) inflation read hotter-than-expected for January. The reading gave more credence to warnings from Fed officials that sticky inflation will see the bank keep rates higher for longer.

Dow Jones Futures fell 0.1% in Asian trade, while S&P 500 futures and Nasdaq 100 Futures were muted. 

Among Asian bourses, tech-heavy indexes logged the steepest gains, given that the sector is the most vulnerable to higher rates. Hong Kong’s Hang Seng index sank 1% as it resumed trade after the Lunar New Year holiday, while South Korea’s KOSPI tumbled 1.5% as investors locked-in recent profits in heavyweight chipmakers. 

Nikkei losses limited as dovish BOJ bets remain in play

Despite Wednesday’s losses, the Nikkei 225 still remained well in sight of a potential record high at above 38,000 points, as losses were limited by the prospect of a dovish Bank of Japan. 

A top BOJ official recently signaled that while the bank will likely raise interest rates this year, it will do so at a slow pace, which allows local businesses to continue benefiting from a relatively low-rate environment. Ultra-low Japanese interest rates were a key driver of the Nikkei's stellar rally through 2023.

Stocks which had seen a strong run-up over the past two sessions were among the biggest decliners on the Nikkei on Wednesday, indicating that profit-taking was in play. SoftBank Group Corp. (TYO:9984) fell nearly 3% after racing to near three-year highs this week.

Losses in SoftBank tracked a 20% overnight slide in British chip designer Arm Holdings (NASDAQ:ARM), in which SoftBank holds a majority stake. The chip designer had more than doubled its market capital since last week amid increasing hype over artificial intelligence. 

Australia’s ASX 200 slides on CBA warning, commodity losses

The ASX 200 slid 1%, coming under pressure from a 2.4% drop in Commonwealth Bank Of Australia (ASX:CBA)- the country’s biggest lender.

CBA clocked a 3% decline in its half-year profit, and warned of worsening economic conditions in Australia as high inflation and interest rates ate into household savings. 

CBA’s warning came after peer ANZ Group Holdings Ltd (ASX:ANZ) also logged middling earnings earlier this week. While ANZ's quarterly revenue still rose, its pace of growth appeared to be stagnating from the prior year.

Shares of ANZ, along with Westpac Banking Corp (ASX:WBC) and National Australia Bank Ltd (ASX:NAB)- the country's biggest banks- fell between 1.3% and 2% on Wednesday.

Losses in heavyweight mining stocks BHP Group Ltd (ASX:BHP) and Rio Tinto Ltd (ASX:RIO) also weighed on the ASX, as commodity prices slid in the wake of the strong U.S. inflation reading. 

Broader Asian markets retreated. Malaysian stocks led losses across Southeast Asia with a 0.6% decline, while futures for India’s Nifty 50 index pointed to a negative open, with local tech heavyweights set to track losses in their U.S. peers.