Hang Seng Index, ASX 200, Nikkei 225: Bank of Japan Takes Center Stage

Highlights

• On Monday, the Hang Seng Index dragged the Asian equity markets into negative territory.
• Fed Vice Chair John Williams affected market bets on a Fed pivot, sending riskier assets into negative territory.
• On Tuesday, the RBA Meeting Minutes and Bank of Japan monetary policy decision will garner investor interest.

Overview of the Monday Session

On Monday, the Hang Seng Index dragged the ASX 200 and the Nikkei into negative territory. Fed commentary from Friday reduced market bets on a Fed pivot, weighing on the appetite for riskier assets. Fed Vice Chair John Williams poured colder water on Fed pivot bets, warning that it was too soon to consider rate cuts.

Better-than-expected US Services PMI numbers failed to counter the hawkish comments. The services sector remains a significant contributor to consumer price inflation. A pickup in service sector activity could force the Fed to reconsider its Fed Funds Rate projections for 2024.

A mixed US equity market session from Friday tested the buyer appetite for riskier assets on Monday. On Friday, the Dow and the Nasdaq Composite Index gained 0.15% and 0.35%, respectively. The S&P 500 slipped by 0.01%.

There were no economic indicators from the Asian region to influence investor sentiment. However, investors awaited further stimulus from Beijing ahead of Tuesday’s Bank of Japan monetary policy decision.

US Housing Sector Data and Fed Chatter to Set the Tone

On Tuesday, overnight US economic indicators from Monday warrants investor attention. The NAHB Housing Market Index reflected the effects of falling mortgage rates on the housing sector. However, investors brushed aside hawkish Fed commentary. FOMC members Austan Goolsbee and Loretta Mester echoed Fed Vice Chair John Williams’s comments from Friday.

On Monday, the US equity had a positive session. The Nasdaq Composite Index ended the day up 0.61%, with the S&P 500 gaining 0.45%. The Dow ended the session flat. 10-year US Treasury yields ended a four-day losing streak, rising by 0.56% to 3.935%.

The RBA and the Bank of Japan to Influence Asian Market Trends

While overnight US market events will influence, the RBA and the Bank of Japan will have more impact on risk sentiment. The RBA Meeting Minutes will garner investor interest early in the session. Notably, the RBA delivered a dovish Rate Statement in December, recognizing softer inflation. The Meeting Minutes must align with the RBA Rate Statement to drive buyer demand for ASX-listed stocks.

However, the Bank of Japan monetary policy decision is the day’s main event. Uncertainty about the timing of a BoJ pivot from negative rates exposes the Asian markets to hawkish forward guidance. Economists expect the BoJ to leave interest rates at -0.10% on Tuesday. Only 20% of economists, according to a Reuters Poll, expect a January BoJ pivot from negative rates.

Beyond the economic calendar, stimulus chatter from Beijing would also move the dial.

ASX 200

The ASX 200 declined by 0.22% on Monday. Despite Fed uncertainty, the tech sector cushioned the losses, with the S&P ASX All Technology Index (XTX) gaining 0.17%. Gold stocks also provided support, while bank, mining, and oil stocks dragged the Index into negative territory.

Gold stocks Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. (EVN) rose by 0.23% and 1.35%, respectively.

BHP Group Ltd (BHP) and Fortescue Metals Group Ltd. (FMG) declined by 0.14% and 0.22%, respectively. However, Rio Tinto Ltd. (RIO) gained 0.30%.

The big four banks also had a mixed session. ANZ Group Holdings Ltd (ANZ) and Commonwealth Bank of Australia (CBA) fell by 0.04% and 0.06%, respectively. Westpac Banking Corp. (WBC) declined by 0.04%. However, National Australia Bank Ltd. (NAB) gained 0.03%.

Oil stocks, Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) declined by 0.29% and 1.29%, respectively.

Hang Seng Index

The Hang Seng Index fell by 0.97% on Monday. The Hang Seng Tech Index (HSTECH) declined by 1.32%, with the Hang Seng Mainland Properties Index (HSMPI) sliding by 2.26%.

Alibaba (9988) gained 0.63%, while Tencent (0700) declined by 0.89%.

Bank stocks had a negative session. HSBC (0005) and China Construction Bank (0939) ended the day down 1.63% and 0.66%, respectively. Industrial Commercial Bank (1398) declined by 0.27%.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei fell by 0.64% on Monday.

Bank stocks saw more losses. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) fell by 1.85% and 0.50%, respectively. However, it was a mixed session for the main components of the Nikkei.

Sony Group Corp. (6758) and Fast Retailing Co. Ltd. (9983) ended the session down 2.17% and 1.18%, respectively. Softbank Group Corp. (9948) and KDDI Corp. (9433) declined by 0.67% and 0.49%, respectively. However, Tokyo Electron Ltd. (8035) bucked the trend, gaining 0.06%.

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