ASX 200, Nikkei 225, Hang Seng Index: Beijing’s Stimulus Bets and the Fed’s Next Move

Key Insights:

• Mixed Friday session for Asian equity markets: ASX200 ends winning streak, Nikkei climbs, Hang Seng closed due to Typhoon Saola.
• Cooler-than-expected wage growth and higher unemployment rate in August US Jobs Report eases hawkish Fed bets.
• Despite an unexpected increase in the China Caixin Manufacturing PMI, new overseas orders fall, highlighting global demand issues.

Friday Overview

It was another mixed session for the Asian equity markets. The ASX200 ended a four-day winning streak while the Nikkei continued to climb. The Hang Seng Index was closed on Friday because of Typhoon Saola.

A mixed US session weighed on the ASX 200. US economic indicators from Thursday delivered Fed monetary policy uncertainty ahead of the US Jobs Report.

The US Personal Income and Outlays Report for July reported a jump in personal spending and an increase in the Core PCE Price Index. However, personal income was softer than expected, leaving the investor sentiment toward Fed monetary policy unmoved.

There were mixed reactions to the US economic calendar. The NASDAQ Composite Index gained 0.11%. However, the Dow and the S&P 500 ended the Thursday session with losses of 0.48% and 0.16%, respectively.

Economic indicators from the Friday session sent mixed signals. The China Caixin Manufacturing PMI failed to provide support despite an unexpected return to growth in August. The pickup in activity stemmed from domestic demand, with new orders from overseas continuing to fall. Australian home loans took another tumble, highlighting RBA-fueled housing sector woes.

Markets Set to Respond to the August US Jobs Report

We expect the Asian markets to respond to the August US Jobs Report. The cooler-than-expected wage growth figures and a higher unemployment rate eased hawkish Fed bets.

On Friday, the US equity markets responded to the Jobs Report. The NASDAQ Composite fell by 0.02%. However, the S&P 500 and Dow ended the day with gains of 0.18% and 0.33%, respectively.

For the global financial markets, the busy US economic calendar fueled bets on the Fed ending its monetary policy tightening cycle.

According to the CME FedWatch Tool, the probability of the Fed delivering a 25-basis point September rate hike stood at 6%. One week earlier, the chance of a 25-basis point interest rate hike stood at 20%. Significantly, bets on further rate hikes in November and December also declined. On Friday, the probability of a 25-basis point December Fed rate hike stood at 30.8% versus 45.2% on August 25.

Beijing Remains in Focus on Stimulus Bets

After the unexpected jump in the Caixin Manufacturing PMI, investors will continue monitoring chatter from Beijing. The PBoC has taken steps to support the ailing housing sector. However, Beijing hasn’t delivered a stimulus package to turn around the economy.

The lack of a significant stimulus package will leave the Hang Seng Index and the CSI 300 at risk of another pullback.

US Labor Day Gives Investors a Breather

The US markets are closed for Labor Day, allowing the Asian markets to digest the latest economic indicators and consider the Fed interest rate trajectory.

ASX 200

The ASX 200 ended a four-day winning streak, falling 0.55%. Despite the Friday loss, the ASX 200 ended the week up 2.29% on Beijing stimulus measures. The big-found and mining stocks were a drag.

Westpac Banking Corp (WBC) and The Commonwealth Bank of Australia (CBA) saw losses of 0.73% and 0.81%, respectively. The National Australia Bank (NAB) and ANZ Group (ANZ) also saw red, falling by 0.21% and 0.63%, respectively.

Mining stocks had a mixed session. Rio Tinto (RIO) gained 1.18%. However, BHP Group Ltd (BHP) and Newcrest Mining (NCM) fell by 0.25% and 1.00%, respectively.

Fortescue Metals Group (FMG) tumbled by 5.27% as investors responded to the news of CFO Christine Morris and a third company executive, Guy Debelle, leaving the firm. Earlier in the week, CEO Fiona Hick was the first of the three to call it a day.

Oil stocks were in recovery mode after the Thursday pullback. Woodside Energy Group (WDS) and Santos Ltd (STO) gained 1.57% and 1.83%, respectively.

Hang Seng Index

The Hong Kong markets were closed on Friday.

Nikkei 225

(For reference purposes only)

The Nikkei 225 rose by a modest 0.28%.

Bank stocks ended the week on a positive note. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group saw gains of 1.63% and 1.68%, respectively.

Looking at the main components, Sony Corp. (6758) and KDDI Corp. (9433) rose by 3.21% and 0.60%, respectively. News of Cerity Partners LLC upping its stake in Sony Corp. contributed to the breakout session.

However, SoftBank Group Corp. (9984) and Tokyo Electron Limited (8035) fell by 0.69% and 0.65%, respectively. Fast Retailing Co (9983) also saw red, declining by 0.45%.

Check out our economic calendar for economic events.