Asian markets fell Wednesday in line with a sell-off across most of the world as traders took their cash off the table after a blockbuster end to 2023, with eyes now on the release this week of Federal Reserve minutes and US jobs data.
Equities surged in the last two months of last year on expectations the US central bank will slash interest rates several times this year as inflation comes down, the labour market softens, and the economy heads toward a soft landing.
However, analysts had warned that the rally was going a little too far and investors should prepare for a pullback, with tech titans such as Apple and Amazon likely to take a hit.
"The most common concern or belief we have heard from investors is that overbought conditions and euphoric sentiment will set up for a reversal to start 2024 in both bond yields" and stocks, Dennis DeBusschere, of 22V Research, said.
"The overbought conditions and sentiment readings are tough to argue with."
On Wall Street, the Nasdaq slumped 1.6 percent and the S&P 500 was also in the red, though the Dow enjoyed a small gain.
And the negative mood continued in Asia, where Hong Kong, Sydney, Seoul and Taipei were among the biggest losers, while Singapore, Wellington, Manila and Jakarta were also down.
Shanghai, however, edged up.
The first major releases of the year come this week, with minutes from the Fed's December policy meeting due later Wednesday, providing investors with a fresh snapshot of officials' thinking with regards the rates outlook.
The post-meeting statement had indicated three cuts this year, though market participants are tipping far more.
On Friday the closely watched non-farm payrolls figures will come in, which lay out how the economy is faring after the Fed ramped borrowing costs to a 22-year high to slay inflation.
Bank boss Jerome Powell has said tempering the jobs market was crucial in the fight against prices, though data in recent months has shown inflation coming down even as labour demand remains high, suggesting the economy is holding up well.
And International Monetary Fund boss Kristalina Georgieva said she was optimistic the Fed will be able to deliver an economic soft landing.
The bank's actions have "brought the desired impact without pushing the economy into recession", she told Christiane Amanpour on CNN International. "Where the US economy is today, definitely a soft landing."
Developments in China are being closely followed after reports that Beijing had removed a top gaming industry official involved in planned curbs on the sector that caused a multi-billion-dollar rout in the country's tech giants.
The draft restrictions published by the government regulator said they were aimed at limiting in-game purchases and preventing obsessive gaming behaviour.
Hong Kong - Hang Seng Index: DOWN 1.0 percent at 16,625.19 (close)
Shanghai - Composite: UP 0.06 percent at 2,964.19
Tokyo - Nikkei 225: Closed for a holiday
Dollar/yen: UP at 142.03 yen from 141.99 yen on Tuesday
Euro/dollar: UP at $1.0952 from $1.0946
Pound/dollar: UP at $1.2629 from $1.2621
Euro/pound: UP at 86.72 pence from 86.70 pence
West Texas Intermediate: DOWN 0.1 percent at $70.32 per barrel
Brent North Sea Crude: DOWN 0.1 percent at $75.80 per barrel
New York - Dow: UP 0.1 percent at 37,715.04 points (close)
London - FTSE 100: DOWN 0.2 percent at 7,721.52 (close)
