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Stocks fell in Asia on Tuesday, with Hong Kong's benchmark index falling nearly 2%, as jitters over Chinese markets dented confidence across the region.
U.S. markets were closed on Monday, so investors had no indication of overnight trading. Early Tuesday, futures for the S&P 500 were down 0.4% and futures for the Dow Jones Industrial Average were down 0.3%.
The Nikkei 225 index in Tokyo fell, ending a New Year's winning streak that took it to its highest level in 34 years. It fell 0.7% to 35,645.18.
The dollar weakened against the Japanese yen even as a former central bank official said the Bank of Japan was preparing to end its long-standing negative interest rate policy. The dollar rose 146.18 yen, from 145.75 late Monday and the highest in more than a month.
The question of when and how the BOJ might emerge from more than a decade of extreme monetary easing, which has kept the key interest rate at minus 0.1%, has plagued the market for months. Speculation about the plan to change its strategy has increased, especially after the Federal Reserve and other central banks sharply raised interest rates to curb inflation, which has soared as economies recovered from the shocks of the pandemic.
Hong Kong's Hang Seng fell 1.9% to 15,904.27 and the Shanghai Composite Index fell 0.6% to 2,868.30.
Investors sold shares of technology and real estate companies. Online grocery delivery company Meituan fell 3.2% and gaming maker Tencent fell 2.7%. Financially troubled property developer China Garden Holding fell 5.6% and Sino-Ocean Group Holding plunged 8.1%.
China will provide an update on its economy on Wednesday. Economists expect annual growth to be 5.3% in the final quarter, up from 4.9% in July and September.
Most forecasts suggest growth in the world's second-largest economy will slow this year as Beijing continues to grapple with a housing crisis and subdued consumer demand. IMF chief Kristalina Georgieva warned in an interview with CNBC on Monday that China could face a “significant decline in growth rates to below 4%” if it does not implement reforms to boost spending.
Elsewhere in Asia, South Korea's Kospi fell 0.7% to 2,508.40 and Australia's S&P/ASX 200 fell 1.2% to 7,410.10.
European markets had a poor start to the week.
Germany's DAX fell 0.5% to 16,622.22 as the government reported the economy shrank 0.3% in 2023 compared to last year. The CAC 40 in Paris lost 0.7% to 7,411.68. Britain's FTSE 100 fell 0.4% to 7,594.91.
In the U.S., stocks have been at record levels for months, taking the S&P 500 to as much as 0.3% of its all-time high on hopes that inflation will cool enough for the Federal Reserve to cut interest rates several times this year .
Loose interest rates and yields reduce pressure on the economy and the financial system while increasing the price of investments.
Traders are largely betting that the Fed will cut its key interest rate six or more times by 2024. That would be a much more aggressive course than the Fed itself has indicated. She even warned against raising interest rates further if inflation could not convincingly move towards its 2% target. The federal funds rate is already at its highest level since 2001.
In other trading, a barrel of U.S. crude oil lost 11 cents to $72.57 in electronic trading on the New York Mercantile Exchange. On Monday the price rose 66 cents to $72.68.
Brent crude, the international standard, rose 14 cents to $78.29 a barrel.
The euro fell from $1.0952 to $1.0916.
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