Asian financial markets opened the week with significant declines as fresh economic indicators from China revealed persistent weakness in the world’s second-largest economy. The regional downturn extended last week’s disappointing performance on Wall Street, where artificial intelligence stocks experienced substantial corrections.
Japan’s Nikkei 225 index led the regional retreat, dropping 1.5% to 50,092.10 points. Market participants remained cautious ahead of the Bank of Japan’s anticipated interest rate decision this week. Despite the market decline, the BOJ’s latest Tankan survey revealed a modest improvement in sentiment among major manufacturers, with the optimism index climbing to 15 from 14 in the previous quarter—marking the highest level in four years.
The positive survey results contrasted with Japan’s recent economic contraction, which saw the economy shrink at a 2.3% annual pace in the July-September period—the first decline in six quarters. However, trade stability has been bolstered by the recent U.S.-Japan agreement that limits baseline import duties to 15%, providing relief for major automakers and electronics manufacturers.
South Korea’s Kospi fell 1.2% to 4,117.68, while Hong Kong’s Hang Seng declined 0.7% to 25,786.45. China’s Shanghai Composite index managed a slight gain of 0.1% to 3,892.45, despite concerning economic data showing fixed-asset investment dropped 2.6% in November year-on-year. Cumulative data revealed an 11.1% decline in such investments through the first eleven months of 2023.
Additional economic indicators showed retail sales growing 4% year-on-year in January-November, while factory output increased 4.8%. These figures followed China’s recent high-level policy meeting that produced no major economic shifts, maintaining the existing approach to stimulating consumer spending and domestic investment.
Capital Economics analyst Zichun Huang commented, ‘Policy support should help drive a partial recovery in the coming months, but this probably won’t prevent China’s growth from remaining weak across 2026 as a whole.’
The broader Asian region mirrored the downward trend, with Australia’s S&P/ASX 200 slipping 0.7% and Taiwan’s benchmark losing 1.1%. Meanwhile, U.S. futures indicated a potential rebound, with S&P 500 and Dow Jones Industrial Average futures both up 0.3%.
The market weakness followed Friday’s significant tech selloff on Wall Street, where the S&P 500 fell 1.1% from its record high to 6,827.41—marking its worst performance in three weeks. The Nasdaq composite dropped 1.7% to 23,195.17, dragged down by AI-related stocks including Broadcom’s 11.4% plunge despite reporting stronger-than-expected quarterly profits.
In commodity markets, U.S. benchmark crude oil gained 30 cents to $57.74 per barrel, while Brent crude rose 29 cents to $61.41. Currency markets saw the U.S. dollar slip slightly against the yen to 155.37, while the euro held steady at $1.1739.