The US Markets: Fed Chair Powell and Fed Rate Cut Bets
On Monday, July 15, Fed Chair Powell said Q2 inflation figures raised confidence that inflation was returning to the 2% target. Powell’s comments cemented investor bets on a September Fed rate cut.
According to the CME FedWatch Tool, the chances of a September Fed rate cut increased from 96.3% on Friday, July 12, to 100% on Monday, July 15.
Wall Street Journal Chief Economics Correspondent Nick Timiraos commented on the Powell speech. He said,
“Fed Chair Jay Powell passed on an opportunity to change expectations that the central bank will hold rates steady at its next meeting. The Q2 inflation data “do add somewhat to confidence” that inflation is returning to 2%.”
US Equity Market Trends
The US equity markets extended their gains from Friday. On Monday, the Dow and the Nasdaq Composite Index saw gains of 0.53% and 0.40%, respectively, while the S&P 500 ended the day up 0.28%.
Expectations of a September Fed rate cut set the tone for the Tuesday morning Asian session. However, concerns about the Chinese economy lingered.
Asian Market Updates: China Woes and the Third Plenum
The Chinese economy expanded by 4.7% year-on-year in Q2, down from 5.3% in Q1. Weaker-than-expected numbers highlighted the need for more fiscal measures from Beijing to bolster the economy.
On Monday, the Communist Party’s Third Plenum began. Investors will be eyeing the closed-door event for any reports of plans to deliver a fiscal stimulus package.
Nikkei Price Forecast
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See all Nikkei forecastsA meaningful fiscal stimulus could boost demand for Hang Seng Index and Mainland China-listed stocks. Conversely, inaction could raise doubts about China meeting its 2024 5% growth forecast.
Some economists believe Beijing will roll out moderate measures, which could disappoint investors.
Natixis Bank Asia Pacific Chief Economist Alicia Garcia Herrero recently commented,
“The difficulty in simultaneously achieving both economic and fiscal targets is a key reason that only moderate policies will likely be announced.”
Hang Seng Index and Mainland China Stocks Extend Their Losses
Meanwhile, the Hang Seng Index fell by 0.70% on Tuesday morning. Real estate and tech stocks contributed to the losses amidst rising concerns about the Chinese economy.
The Hang Seng Tech (HSTECH) Index declined by 1.22%. Baidu (9888) slid by 5.58%, while Alibaba (9988) and Tencent (0700) saw losses of 2.23% and 1.41%, respectively.
The Hang Seng Mainland Properties Index (HSMPI) was down 1.05%.
Mainland China’s equity markets also saw morning losses. The Shanghai SE Composite Index and CSI 300 declined by 0.33% and 0.02%, respectively.
Nikkei Index Gains on a Weaker Yen and Tech Stocks
The Nikkei Index was up 0.33 on Tuesday morning, with a stronger USD/JPY boosting demand for Nikkei-listed export stocks.
Tokyo Electron Ltd. (8035) and Softbank Group Corp. (9984) saw gains of 0.45% and 1.14% respectively.
ASX 200 Falls on Mining Stock Losses
The ASX 200 Index declined by 0.12% on Tuesday morning.
Mining giant Rio Tinto Ltd. (RIO) and BHP Group Ltd (BHP) slid by 2.18% and 2.04%, respectively. Rio Tinto missed Q2 iron ore shipping estimates, dragging BHP and the ASX 200 into negative territory.
Investors should remain alert as the focus shifts to the Communist Party’s Third Plenum. Closely monitor the news wires, real-time data, and expert commentary to manage trading strategies accordingly. Stay informed with our latest news and analysis to trade the Asian equity markets.
