A wave of caution swept across Asia-Pacific financial markets on Monday, with most major indices closing lower as investors digested a fresh batch of economic data from China and the implications of Moody’s recent downgrade of the US credit rating.
This subdued sentiment cast a shadow over the region, leading to broad-based declines, including a modest dip in Indian benchmarks like the Sensex.
The primary catalysts for the day’s downturn were twofold.
Firstly, economic indicators from China revealed a slowdown in retail sales growth for April, signaling persistent worries about consumption in the world’s second-largest economy.
Retail sales rose 5.1% year-on-year in April, falling short of Reuters’ estimates for 5.5% growth.
Conversely, industrial output provided a slightly more resilient picture, growing 6.1% year-on-year in April.
While this was stronger than analysts’ expectations for a 5.5% rise, it represented a slowdown from the 7.7% jump recorded in March, indicating that the impact from US tariffs was perhaps not as severe as initially feared, though still a moderating factor.
Secondly, the decision by Moody’s Ratings on Friday to downgrade the US sovereign credit rating by one notch, from Aaa to Aa1, continued to reverberate through global markets.
Moody’s cited mounting challenges in funding the US federal budget deficit and the increasing cost of refinancing debt in a high-interest-rate environment as key reasons for its action.
With this move, Moody’s aligns with other major rating agencies; S&P had previously downgraded the US rating in 2011, and Fitch followed suit in 2023, both reducing it to AA+.
Despite the gravity of a sovereign downgrade, some analysts suggested a muted immediate market reaction.
Regional market performance
The cautious sentiment translated into widespread losses across Asian bourses.Hong Kong’s Hang Seng index declined 0.05% to close at 23,332.72, while mainland China’s CSI 300 dropped 0.48%.
Japan’s benchmark Nikkei 225 slipped 0.68% to finish at 37,498.63, and the broader Topix index lost 0.08% to end the day at 2,738.39.
In South Korea, the Kospi declined 0.89% to close at 2,603.42, with the small-cap Kosdaq trading 1.56% lower to close at 713.75.
Australia’s S&P/ASX 200 also succumbed to the pressure, falling 0.58% to close at 8,295.1, as the Reserve Bank of Australia commenced its two-day monetary policy meeting.
This downturn in Asia followed a mixed close for US markets on Friday, where the S&P 500 had managed to post a fifth consecutive session of gains and a strong weekly advance, as investors seemingly looked past disappointing consumer sentiment data and persistent inflation worries.
On Friday, the S&P 500 climbed 0.70% to 5,958.38, the Nasdaq Composite gained 0.52% to 19,211.10, and the Dow Jones Industrial Average rose 0.78% to 42,654.74, pushing the 30-stock benchmark into positive territory for 2025.
However, US stock futures pointed to a weaker start for the new week, with futures tied to the Dow Jones Industrial Average dropping 292 points, or 0.7%, S&P 500 futures slipping 0.7%, and Nasdaq 100 futures falling 0.8%.
This came after a four-day rally driven by temporary US-China tariff cuts and encouraging inflation reports.
Sensex ends weaker amid sectoral divergence
The Indian stock market concluded Monday’s trading session on a subdued note.The BSE Sensex closed the day at 82,059.42, reflecting a decline of 271.17 points or 0.33%. Similarly, the Nifty 50 ended at 24,941.35, down 74.35 points or 0.3%.
In a slight divergence, the Nifty Bank index managed to settle with a marginal gain of 0.12% at 55,420.70.
Despite the overall market weakness, some heavyweight stocks managed to post gains.
Bajaj Finance (NSE:BJFN), PowerGrid, NTPC (NSE:NTPC), IndusInd Bank (NSE:INBK), and SBI (NSE:SBI) were among the top performers in the Sensex 30.
Conversely, IT and technology stocks faced significant selling pressure, with Infosys (NSE:INFY), Reliance (NSE:RELI), TCS (NSE:TCS), Tech Mahindra (NSE:TEML), and Eicher Motors (NSE:EICH) emerging as key laggards, experiencing declines ranging from 1% to 3%.