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Asian Markets Cautious As Uptick In U.S. Data Gives Way To Potential Rate Hikes

Asian markets responded negatively to the Commerce Department’s report that showed an upward revision in the U.S. fourth-quarter Gross Domestic Product (GDP) growth. Only Japan’s Nikkei managed to add gains as other Asian indices closed lower.

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GDP revised up

The positive revision in the GDP had firmed up beliefs that the world’s largest economy is back into recovery, however, equally stronger expectations of nearing rate hikes cast concerns among market participants. According to the data released on Friday, the U.S. economy registered 1.45% growth during the fourth quarter, higher than an earlier estimate of 1% growth.

Shanghai SE Composite Index slipped 0.73% to 2,957.82 but Nikkei 225 rose 0.77% to 17,134.37. Taiwan TSEC 50 Index fell 0.17% to 8,690.45 while Mumbai Sensex lost 1.35% to 24,996.09. Hang Seng and Australia markets were closed on account of Easter holiday.

Japan’s data matters

Okasan Securities strategist, Yoshinori Ogawa, said that the fears about a possible recession in the U.S. are easing off as traders are keen to know if the U.S. economy can continue to edge higher or not.

Upbeat U.S. economic data is gearing up expectations of a rate hike by as early as April, which is impacting Japanese stocks positively. Usually, a stronger dollar implies more revenues for export-driven Japan’s economy. But, the boost does cost in terms of foreign investment outflows.

At the same time, investors’ confidence remains unstable ahead of the release of economic data later this week. The most significant data that could guide market sentiment will be the CPI number. According to Li Lifeng, Sinolink Securities’ analyst, any higher inflation number might give scope for monetary tightening.

Meanwhile, Chinese stocks fell over uncertainty around economic conditions and worries stemming from potential rate hikes in the U.S. The European markets will remain closed for the Easter Monday holiday while key data followed by Fed comments will dictate the U.S. markets later today.

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