Hang Seng Index, ASX 200, Nikkei 225: Bank of Japan and Fed Decisions Loom

Key Insights:

• The Hang Seng Index led the Nikkei and ASX 200 on a positive end to a testy week for the Asian equity markets.
• On Friday, Chinese industrial profits raised hopes of a continued turnaround in the Chinese economy.
• On Monday, the Middle East conflict and oil prices will be focal points.

Overview of the Friday Session

On Friday, the Hang Seng Index ended the week on a high note, with the ASX 200 and Nikkei ending the session in positive territory.

Investors responded to overnight US economic indicators and corporate earnings from Thursday. The US economy expanded at a faster pace than expected in Q3. However, weaker disposable income and inflation components of the GDP report were positives for the Asian equity markets.

The downward trend in disposable income aligned with bets on the Fed ending its interest rate hiking cycle. 10-year US Treasury yields responded to the GDP Report, ending the Thursday session down 2.22%.

US corporate earnings weighed on the US equity markets. Meta Platforms (META) beat earnings estimates but disappointed investors with a weak outlook. In contrast, Amazon.com (AMZN) released earnings after the closing bell, beating forecasts.

On Thursday, the Nasdaq Composite Index declined by 1.76%. The Dow and the S&P 500 ended the session down 0.76% and 1.17%.

The Asian economic calendar garnered investor interest on Friday. Australian producer prices were hotter-than-expected, raising bets on a more hawkish RBA. Inflation figures from Japan also came in higher, fueling bets on a shift in Bank of Japan policy goals. However, industrial production figures from China raised hopes of a turnaround in the Chinese economy.

US Economic Indicators and Central Bank Jitters

In the Friday US session, US personal spending, Core PCE Price Index, and personal income figures supported the bets on a higher for longer Fed rate path.

The personal income and spending figures were upbeat. However, the markets expect a marked decline in consumption, limiting the impact of the figures on the US equity markets. An uncertain economic outlook weighed on investor sentiment.

On Friday, the Nasdaq Composite Index gained 0.38%, attributable to Amazon.com (AMZN), which jumped 6.83%. However, the Dow and S&P 500 fell by 1.12% and 0.48%, respectively.

Uncertainty about the US economic outlook could test market risk appetite on Monday. Expectations of slower US growth and a hawkish Fed rate path are headwinds for the Asian markets.

The Asian economic calendar also warrants consideration, with Australian retail sales in focus. A pickup in consumer spending would support bets on an RBA rate hike, a test for the ASX 200.

However, corporate earnings could have an impact on the Asian equity markets. Bank of China HK (2388), Fortescue Metals (FMG), HSBC (0005), Mitsubishi Motors Corp (7211), and Wesfarmers (WES) are among the big names releasing earnings on Monday.

In the Futures Markets, the ASX 200 and the Nikkei 225 were down 67 and 440 points, respectively. Fears of an escalation in the Middle East conflict weighed on the Asian futures markets.

ASX 200

The ASX 200 rose by 0.21% on Friday. The S&P/ASX All Technology Index (XTX) continued to fall on hawkish bets on the RBA. However, mining and the big four banks ended the session with gains.

On Friday, the National Australia Bank (NAB) and the Commonwealth Bank of Australia (CBA) gained 0.71% and 0.82%. Westpac Banking Corp (WBC) and ANZ Group (ANZ) rose by 0.49% and 0.24%.

Fortescue Metals Group (FMG) gained 0.18%. Rio Tinto (RIO) and BHP Group Ltd (BHP) rose by 0.05% and 0.29%.

Woodside Energy Group (WDS) and Santos Ltd (STO) ended the day with gains of 0.49% and 0.51%.

Hang Seng Index

The Hang Seng Index rallied 2.08% on Friday.

Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) gained 3.32% and 1.81%. Bank stocks also ended the session in positive territory.

HSBC Holdings PLC (HK:0005) and Industrial and Commercial Bank of China (HK:1398) ended the day up 1.66% and 1.32%. China Construction Bank (HK:0939) rose by 0.66%.

Nikkei 225

(Graph for reference purposes only)

The Nikkei gained 1.27%, with bank and tech stocks ending the session with solid gains.

Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group (8306) rallied by 2.71% and 2.28%, respectively.

SoftBank Group Corp. (9984) and Tokyo Electron Limited (8035) ended the day up 1.59% and 1.40%. Amazon.com earnings supported tech stocks. Fast Retailing Co (9983) and KDDI Corp. (9433) rose by 0.66% and 0.38%, while Sony Corp. (6758) fell by 1.02%.

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