Asian shares slip after Wall Street logs its worst day in 3 weeks

Asian Markets Retreat as China’s Investment Falters and AI Stocks Slump

Asian stock markets fell Monday following disappointing economic data from China and a tech-driven selloff on Wall Street last week. China’s latest economic indicators revealed persistent weakness in domestic demand, while Japan’s markets declined ahead of a crucial Bank of Japan interest rate decision.

In Tokyo, the Nikkei 225 index dropped 1.5% to 50,092.10 as investors awaited the Bank of Japan’s upcoming interest rate decision. The central bank’s quarterly “tankan” survey showed slight improvement in sentiment among large manufacturers, with the optimism index rising to 15 from 14 in the previous quarter—the highest level in four years. However, forecasts for the coming quarter were less positive, reflecting continued uncertainty.

Japan’s economy contracted at a 2.3% annual pace in the July-September quarter, marking the first decline in six quarters. A recent agreement between Japan and the United States to limit baseline import duties to 15% has helped reduce uncertainty for major Japanese automakers and electronics companies, but economic challenges remain.

Analysts suggest the stronger “tankan” results may encourage the BOJ to proceed with a 0.25 percentage point rate hike, which would bring the key rate to 0.75%. This potential monetary tightening comes despite mixed economic signals.

Elsewhere in Asia, South Korea’s Kospi fell 1.2% to 4,117.68, while Hong Kong’s Hang Seng declined 0.7% to 25,786.45. The Shanghai Composite index bucked the trend, edging up 0.1% to 3,892.45.

China’s latest economic data painted a concerning picture for the world’s second-largest economy. Investment in fixed assets such as factory equipment and infrastructure fell 2.6% in November from a year earlier, suggesting an 11.1% year-on-year drop in the first 11 months of 2023. While retail sales rose 4% in January-November compared to the previous year, and factory output climbed 4.8%, these figures indicate continued economic strain.

The disappointing data follows a high-level meeting of China’s Communist Party leadership last week that produced no major policy shifts. Leaders pledged to continue efforts to boost consumer spending and investment to drive higher domestic demand, but analysts remain skeptical about the near-term outlook.

“Policy support should help drive a partial recovery in the coming months, but this probably won’t prevent China’s growth from remaining weak across 2026 as a whole,” noted Zichun Huang of Capital Economics.

In Australia, the S&P/ASX 200 declined 0.7% to 8,640.60, while Taiwan’s benchmark lost 1.1%. U.S. stock futures showed signs of recovery, with S&P 500 and Dow Jones Industrial Average futures up 0.3%.

The regional declines followed a disappointing end to last week on Wall Street, where the S&P 500 fell 1.1% from its all-time high, marking its worst day in three weeks. The tech-heavy Nasdaq composite dropped 1.7%, while the Dow Jones Industrial Average retreated 0.5%.

AI heavyweight Broadcom dragged markets lower, tumbling 11.4% despite reporting stronger-than-expected quarterly profits. The selloff added to concerns about the AI boom that emerged a day earlier when Oracle plunged nearly 11% despite beating profit expectations. Nvidia, a key player in the AI chip sector, fell 3.3%.

In commodity markets, oil prices showed modest gains in early Monday trading. U.S. benchmark crude oil rose 30 cents to $57.74 per barrel, while Brent crude, the international standard, increased 29 cents to $61.41 per barrel.

Currency markets saw the U.S. dollar slip to 155.37 Japanese yen from 155.75 yen late Friday, while the euro remained unchanged at $1.1739.