Nikkei 225 Pulls Back Slightly With Fed Meeting Looming Heavy

The Japanese stock markets staggered today, largely shadowed by Wall Street's significant downturn to end yesterday firmly red, the impending Fed Meeting, and compounded by the closure of multiple markets in the region due to public holidays.

Tokyo's benchmark Nikkei 225 index retreated 0.32% to conclude at 38,274.05 amidst emerging data on Japan's manufacturing sector. The April Jibun Bank Manufacturing Purchasing Managers' Index (PMI) indicated a tepid recovery, inching up to 49.6 from the previous month's 48.2. The figure remaining below 50 implies a contraction, albeit a slower one, in factory activity, casting a pall over investor sentiment in early trade.

Currency markets saw the U.S. dollar appreciate marginally against the Japanese yen, ticking up to 157.917 from 157.7 yen. In Australia, the bearish mood persisted with the S&P/ASX 200 index declining 1.23% to finish at 7,569.90, and the All Ordinaries dropped 1.26% reflecting the broader unease in financial markets.

As the Federal Reserve's meeting loomed, expectations for interest rates remained status quo. Traders, however, were eager for any cues on the economic landscape from Fed Chair Jerome Powell’s commentary, which has historically swayed market sentiments.

Meanwhile, within the specialty markets, cannabis stocks soared amidst reports of the U.S. Drug Enforcement Administration's consideration to reclassify marijuana, reducing its designation as a danger-level drug. This speculative movement underscored how regulatory news could rapidly alter investment landscapes.

Despite the volatility witnessed in this period, the Nikkei 225 has witnessed a strong start to 2024, adding a shade under 15% and pushing to the index to all time highs in just the last month. The ongoing earnings reporting season will continue to drive a lot of broader sentiment globally, and the Fed Meeting will be expected to be the next major catalyst.