Asian stocks flat amid Fed angst, Nikkei rallies on dovish BOJ bets

Investing.com -- Most Asian stocks moved little on Monday as uncertainty kicked in ahead of a Federal Reserve meeting this week, although growing Japanese stocks extended their rally, tracking a dovish outlook for the Bank of Japan.

BOJ to offer no surprises this week, Japanese stocks rally

Japan’s Nikkei 225 and TOPIX rose 0.7% each, hovering just below 33-year peaks as media reports suggested that the Bank of Japan will leave its ultra-loose policy unchanged later this week.

Data on Monday showed that wholesale inflation eased further through May, putting less pressure on the BOJ to tighten policy. The reading comes after Tokyo inflation data pointed to easing consumer inflation in the country, presenting a better environment for economic activity.

But Japanese stocks were the outliers for the day, with most other Asian markets trending lower as investors hunkered down before more cues on U.S. monetary policy.

While the Federal Reserve is widely expected to pause its rate hike cycle at the conclusion of a two-day meeting on Wednesday, markets remained on edge over any potentially bullish signals from the central bank.

South Korea’s KOSPI fell 0.5%, while India’s Nifty 50 and BSE Sensex 30 indexes were flat in early trade. Markets were awaiting a reading on Indian consumer inflation due later in the day, after the Reserve Bank kept interest rates steady last week.

Focus is also on U.S. consumer inflation data due on Tuesday, which is likely to factor into the Fed’s decision.

Chinese stocks extend losses, rate cuts in focus

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.1% and 0.3%, respectively, extending losses from the prior week as traders continued to question the scope of an economic recovery in the country this year. 

Hong Kong’s Hang Seng index also lost 0.5% on weakness in locally-listed mainland stocks.

Major property stocks were the worst performers across Chinese indexes after investment bank Goldman Sachs flagged a prolonged slowdown in the sector, and that smaller cities and private players would be hit by sluggish development and a lack of funding.

But bigger losses in Chinese stocks were somewhat limited by growing expectations that the government will roll out more stimulus measures to support the economy.

Several state-owned Chinese banks began cutting interest rates on yuan deposits since last week, potentially heralding a broader cut by the People’s Bank of China.