Asian Stocks Down Following U.S.’ Rollercoaster Session, “Volatility is Back”

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Asian Stocks Down Following U.S.’ Rollercoaster Session, “Volatility is Back”
Credit: © Reuters.

By Gina Lee

Investing.com – Asia Pacific stocks were down on Tuesday morning, alongside U.S. equity futures. U.S. shares closed a hair-raising volatile session as concerns over U.S. Federal Reserve monetary policy tightening and geopolitical tension continue to grow.

Japan’s Nikkei 225 fell 2.01% by 9:24 PM ET (2:24 AM GMT) and South Korea’s KOSPI fell 2.33%

In Australia, the ASX 200 slid 2.46%. The country released its consumer price index and the National Australia Bank Business Confidence Index earlier in the day.

Hong Kong’s Hang Seng Index fell 1.67%.

China’s Shanghai Composite was down 0.93% and the Shenzhen Component was down 0.69%. Developer China Evergrande Group (HK: 3333 ) urged offshore bondholders to refrain from aggressive legal action over repayments, in response to an ad-hoc group of the company’s overseas creditors threatening to take enforcement measures.

In the U.S., the S&P 500 and Nasdaq 100 contracts retreated but dip buyers left U.S. shares in the green on high volumes. This was a sharp U-turn from a selloff in Monday’s session amid a 4% drop in U.S. equities.

Investors will closely monitor the Fed’s policy decision , which will be handed down on Wednesday. Global shares are down more than 6% in January to date over expectations that the central bank will hike interest rates sooner than expected, alongside uneven company earnings.

The question for investors now is whether this fall is a buying opportunity or a warning of wider stress across more asset classes.

“Volatility is back,” RBC Capital Markets head of U.S. equity strategy Lori Calvasina told Bloomberg.

“We’re having a sea-change in terms of Fed policy. Equity investors frankly have been behind the curve in anticipating what’s coming, so there’s a lot of catch-up to do.”

The Cboe Volatility Index climbed to its highest level in over a year before receding.

The stock recovery could come sooner than expected and “it’s time to make shopping lists and look for ‘babies that got thrown out with the bathwater,’” Oppenheimer strategists led by John Stoltzfus said in a note on Monday.

However, other investors, including Wharton School of the University of Pennsylvania professor and author of “Stocks for the Long Run” Jeremy Siegel, warned that a challenging quarter lies ahead.

“I’m still very positive on long-term equities but I think it’s in for a rocky time the next two or three months. We have to get used to the fact that the Fed is going to be much more hawkish,” he said.

Geopolitical tensions over Ukraine also continue to mount. The U.S. is putting as many as 8,500 troops on heightened alert for deployment to bolster NATO forces in Eastern Europe if needed.

Meanwhile, the International Monetary Fund will launch the World Economic Outlook update, while the U.S. releases its Conference Board (CB) Consumer Confidence index , later in the day.

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