Stocks across Asia fall due to Fed caution, inflation in China underwhelms

Asian stocks declined on Wednesday as caution grew regarding the upcoming interest rate decision by the US Federal Reserve, with Chinese shares facing pressure from ongoing deflationary signs in the nation.

In India, the Nifty 50 index experienced a slight increase after recent declines, which were driven by significant losses in IndiGo (NSE: INGL), the leading airline in the country. IndiGo's shares have dropped nearly 8% this week due to an ongoing operational crisis at the airline.

Regional stocks were also affected by increased geopolitical tensions between Japan and China, particularly after the US criticised Beijing for targeting Japanese military aircraft with radars during a training exercise last week.

Asian markets received a lukewarm lead from Wall Street, where US stocks also experienced slight declines in overnight trading due to Fed-related caution. Although the central bank is largely anticipated to reduce interest rates by 25 basis points, analysts cautioned about the possibility of hawkish signals from the Fed.

S&P 500 Futures remained unchanged at 23:14 ET (04:14 GMT).

Chinese stocks fall as deflationary concerns linger

The Shanghai Shenzhen CSI 300 and Shanghai Composite indexes in China dropped by 0.9% and 0.7%, respectively, while Hong Kong’s Hang Seng index decreased by 0.4%.

Government statistics indicated that the Chinese consumer price index inflation increased year-on-year in November but unexpectedly declined from the previous month. The producer price index inflation has now contracted for the 38th consecutive month.

This data highlighted that deflation continues to be a significant issue in the world’s second-largest economy, raising concerns about growth as we approach 2026. It also revealed that domestic demand, a crucial component of the Chinese economy, remains weak.

China’s Politburo, the nation’s highest decision-making body, committed to implementing more fiscal stimulus in the upcoming months during its meeting this week. However, these commitments provided little immediate relief to Chinese markets.

Ongoing losses in chipmakers also weighed on Chinese stocks, following US President Donald Trump’s announcement that he would permit NVIDIA Corporation (NASDAQ: NVDA) to sell more advanced artificial intelligence chips in the country.

Japan faces pressure from persistent inflation

Japan’s Nikkei 225 index fell by 0.3%, while the broader TOPIX index remained flat.

Japanese PPI inflation remained persistent in November, as indicated by data released earlier today, leading to increased speculation regarding a potential interest rate hike by the Bank of Japan in the near future.

The head of the BOJ previously indicated that the central bank would contemplate raising interest rates during its upcoming meeting in December, pointing to the ongoing persistence of Japanese inflation.

Rising geopolitical tensions between Japan and China have also impacted their respective stock markets, as a diplomatic dispute over military actions in Taiwan shows little sign of resolution.

Broader Asian stock markets were generally under pressure ahead of the Federal Reserve's decision. Australia’s ASX 200 remained unchanged after the Reserve Bank adopted a hawkish stance on Tuesday, with Governor Michele Bullock minimising, by and large, expectations for further interest rate reductions.

Singapore’s Straits Times index decreased by 0.3%, while South Korea’s KOSPI remained stable.