Asian stocks see little holiday cheer as rate-cut rally wears thin

investing.com:

Investing.com-- Asian stocks moved in a flat-to-low range in holiday-thinned trade on Tuesday as soft U.S. inflation data fueled bets that the Federal Reserve will cut interest rates in 2024, although uncertainty over the timing of the move remained.

Regional markets took few positive cues from a softer-than-expected reading on the PCE price index — the Fed’s preferred inflation gauge, as a rally on the prospect of lower lending rates now appeared to be wearing thin.

Doubts over more gains in U.S. markets also kept sentiment muted, as Wall Street indexes came within sight of new highs last week. U.S. stock index futures were muted on Tuesday.

Thin trading volumes, on account of Christmas holidays in several major markets, also offered Asian markets little direction.

Still, most regional markets were sitting on strong gains in 2023 after the Fed signaled it was done raising interest rates and will consider rate cuts in 2024.

But markets remained uncertain over the timing of the rate cuts, as several Fed officials pushed back against expectations that interest rate cuts will come early. Signs of worsening global economic conditions also kept risk appetite muted.

Japan’s Nikkei 225 index moved little on Tuesday after Bank of Japan Governor Kazuo Ueda marked progress towards the bank’s 2% annual inflation target.

Progress towards the inflation target marks a greater chance of the BOJ eventually ending its ultra-dovish stance, after more than seven years of negative interest rates. Ueda's comments came after data last week showed Japanese inflation fell substantially in November.

But the move bodes poorly for Japanese stocks, given that loose monetary conditions were a key driver of a stellar rally in regional markets this