Hang Seng, ASX 200, Nikkei 225 Index: Asian Markets Tremble Amid Inflation Fears

Key Insights:

• Asian markets plagued by risk aversion; Hang Seng and Nikkei witnessed steep declines on Thursday.
  • Elevated U.S. Treasury yields persisted.
• Rising oil prices spooked investors, hinting at no respite in consumer prices.

Overview of the Thursday Session

On Thursday, the Nikkei and the Hang Seng Index saw heavy losses. The ASX 200 also ended the session in negative territory.

Risk aversion spread across the Asian equity markets. Investor jitters over the higher-for-longer interest rate environment fueled a flight to safety. Rising oil prices have spooked investors hoping for a sharp pullback in consumer prices. A marked softening in inflationary pressures would ease pressure on central banks to maintain hawkish interest rate paths.

Better-than-expected US core durable goods orders from Wednesday and gains for the NASDAQ Composite Index and the S&P 500 failed to offer support.

Market fears of a deepening real estate crisis in China and uncertainty about the impact on the broader economy added to the gloomy mood. The Chinese markets are closed on Friday for the Mid-Autumn Festival and throughout next week for the National Day holidays.

Elevated US Treasury yields continued to weigh on the tech sector despite Treasury yields easing back in the session.

The Friday Session: Signals from US Jobless Claims and Pre-US Inflation Jitters

Overnight, US jobless claims signaled tight labor market conditions. Initial jobless claims rose from 202k to 204k. Economists forecast an increase to 215k. Tight labor market conditions will likely pressure the Fed to tackle wage growth and consumption.

However, the US equity markets responded to a pullback in crude oil prices and 10-year Treasury yields. On Thursday, the NASDAQ Composite Index rose by 0.83%. The Dow and the S&P 500 end the day up 0.35% and 0.59%, respectively.

Considering the Asian economic calendar, economic indicators from Japan would move the dial. The Bank of Japan remains focused on wage growth and demand-driven inflationary pressures, precursors for exiting negative rates. Unemployment, retail sales, and consumer confidence figures must support an uptrend in wages and consumption to support a move away from negative rates.

While economic indicators from the Asian region will draw interest this morning, there are a few curve balls for investors to consider.

Later today, the US Core PCE Price Index and personal spending figures will influence investor sentiment. Sticky US inflation and a pickup in personal spending may raise bets on a December Fed rate hike.

There is also the ongoing threat of a US government shutdown and the risk of a Chinese real estate company collapse to factor into the final trading session of the third quarter.

In the Futures Markets, the ASX 200 and the Nikkei 225 were up 45 and 150 points, respectively.

ASX 200

The ASX 200 slipped by 0.08%. Tech stocks continued to weigh on the broader index. The S&P/ASX All Technology Index (XTX) slid by 0.87%. However, the energy sector and mining stocks cushioned the downside.

Rio Tinto (RIO) and BHP Group Ltd (BHP) rose by 1.22% and 0.55%, with Fortescue Metals Group (FMG) gaining 1.42%. However, Newcrest Mining (NCM) slumped by 4.98% on sliding gold prices.

ANZ Group (ANZ) bucked the broader market trend, gaining 1.11%.

However, the National Australia Bank (NAB) and the Commonwealth Bank of Australia (CBA) fell by 0.55% and 0.58%, with Westpac Banking Corp (WBC) seeing a 0.28% loss.

Woodside Energy Group (WDS) and Santos Ltd (STO) rallied 2.86% and 3.79%, respectively.

Hang Seng Index

The Hang Seng Index reversed the gains from Wednesday, sliding 1.36%. On Thursday, the Hang Seng Mainland Properties Index (HSMPI) slid by 1.39%. China Evergrande (HK:3333) suspended trading on Wednesday.

Beyond the property sector, Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) fell by 1.52% and 1.78%, respectively.

Bank stocks also declined. China Construction Bank (HK:0939) and the Industrial and Commercial Bank of China (HK:1398) ended the day down 1.13 % and 1.07%, respectively. HSBC Holdings PLC (HK:0005) slipped by 0.41%.

Nikkei 225

(Graph for reference purposes only)

The Nikkei 225 tumbled by 1.54% on Thursday.

Bank stocks saw modest gains. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group ended the day up 0.03% and 0.39%, while the main components saw heavy losses.

Fast Retailing Co (9983) and SoftBank Group Corp. (9984) slid by 1.87% and 1.55%. Tokyo Electron Limited (8035) declined by 1.21%.

Sony Corp. (6758) and KDDI Corp. (9433) ended the day down 1.13% and 1.17%.

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