Asian markets decline as the rate-cut optimism fades

With investors locking in gains following a week-long surge sparked by a dovish Federal Reserve, most Asian markets sank on Thursday. Losses were led by Japan's Nikkei 225 amid a growing controversy involving the nation's largest automakers.

Wall Street led the way weakly in regional markets on Wednesday, but U.S. indexes declined from almost all-time highs. In addition to profit-taking, investors also lowered their expectations for early monetary easing from the Fed, which negatively impacted stocks.

With sharp losses in major car companies, the Nikkei 225 fell 1.6% on Thursday, making it by far the worst performing index in Asia.

The largest carmaker in Japan, Toyota Motor, had an almost 4% decline after announcing that its Daihatsu division will stop shipping any vehicles due to serious safety rule violations. Toyota was the largest weight on the index and the greatest decliner on the Nikkei.

With the Nikkei rising to 33-year highs on Wednesday, there was a significant profit-taking in Japanese markets. Because of the Bank of Japan's dovish stance, the index has performed among the best among Asian bourses this year.

Although the Fed said that it was done raising interest rates and would look at rate reduction in 2024, other Asian markets witnessed some losses as well. However, they had been resting on big gains for the previous week.

Strong performance was seen in Chinese stocks, with the benchmark Shanghai Shenzhen CSI 300 increasing 0.6% following a dive to over five-year lows on Wednesday. However, the Hang Seng index in Hong Kong dropped 0.4%, while the Shanghai Composite declined 0.1%.

Chinese stocks underperformed their Asian counterparts this year due to worries over a slow economic rebound. Beijing's phased stimulus programme further eroded public opinion of China.

The Nifty 50 index for India was expected to begin slightly higher in the future after plunging from almost all-time highs in the previous session. Despite the increased confidence regarding the Indian economy, the Nifty touched many new highs earlier in December and continued to be one of the best-performing Asian bourses.

(Sources: investing.com, reuters.com)