Hang Seng Index, ASX 200, Nikkei 225: Fed Chair’s Dovish Speech and China in Focus

Highlights

• The Hang Seng Index led the ASX 200 and Nikkei into negative territory.
• Chinese economic uncertainty and Fed policy jitters affected buyer demand for riskier assets.
• On Monday, the Asian equity markets will respond to Fed Chair Powell’s speech from Friday and the Asian economic calendar.

Overview of the Friday Session

On Friday, the Asian equity markets started December on a weaker footing. The Hang Seng Index, the Nikkei, and the ASX 200 ended the session in negative territory.

Investors reacted to US stats and moves across the US equity markets.

Overnight US economic indicators from Thursday and the Nasdaq Composite Index set the tone for the Friday session. US inflation and personal income/spending figures reflected the effects of Fed policy measures to cool the economy and tame inflation.

On Thursday, the Nasdaq Composite Index fell by 0.23%. The Dow and S&P 500 gained 1.47% and 0.38%, respectively. 10-year US Treasury yields increased by 1.62%, ending the session at 4.328%.

The Asian economic calendar influenced investor risk appetite on Friday. Manufacturing PMI numbers from China improved but continued to signal lackluster growth. However, the NBS PMI numbers from Thursday continued to flag a manufacturing sector contraction in November. From Australia, the manufacturing sector contracted at a more marked pace, highlighting weak demand.

Fed Chair Powell, the Australian Economy, and China in Focus

Last week, Fed Chair Powell poured cold water on speculation of a Fed rate cut in H1 2024. The Fed Chair said,

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease.”

However, the markets considered the speech dovish, with Powell saying, “Interest rates were well into restrictive territory.”

The Nasdaq Composite Index and S&P 500 gained 0.55% and 0.59%, respectively, with the Dow rising by 0.82%. 10-year US Treasury yields slid by 3.03%, ending the session at 4.197%. Gold (XAU/USD) rallied 1.56%, ending the day at $2,071.88.

On Monday, Fed Chair Powell’s speech and US equity market gains will set the tone for the Asian session. However, investors must consider economic indicators from Australia and stimulus chatter from Beijing.

Stats from Australia include housing sector numbers and company gross profits. Company gross profits will likely have more impact. Economists forecast company gross profits to decline by 0.3% in Q3 vs. a 13.1% slump in the previous quarter.

In the Asian futures, the ASX 200 and the Nikkei were up 65 and 50 points, respectively, on Monday.

ASX 200

The ASX 200 declined by 0.20% on Friday. Tech, gold, energy, and bank stocks dragged the Index into negative territory. The S&P ASX All Technology Index (XTX) fell by 0.50% in response to the Nasdaq Composite loss on Thursday.

Evolution Mining Ltd. (EVN) and Northern Star Resources Ltd. (NST) ended the session down 1.22% and 2.28%. Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) fell by 0.52% and 0.14%.

Bank stocks had a mixed session. Commonwealth Bank of Australia (CBA) and Westpac Banking Corp. (WBC) declined by 0.45% and 0.47%. However, National Australia Bank Ltd. (NAB) and ANZ Group Holdings Ltd (ANZ) ended the day up 0.11% and 0.25%.

Mining stocks also had a mixed session. BHP Group Ltd (BHP) and Fortescue Metals Group Ltd. (FMG) gained 0.09% and 0.84%, while Rio Tinto Ltd. (RIO) fell by 0.10%.

Hang Seng Index

The Hang Seng Index ended the Friday session down 1.25%.

Alibaba (9988) and Tencent (0700) slid by 1.24% and 2.45%.

Bank stocks had a mixed session. HSBC (0005) ended the day flat. Industrial and Commercial Bank (1398) and China Construction Bank (0939) declined by 1.34% and 1.33% over China’s economic woes.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei 225 ended Friday down 0.17%. Tech stocks contributed to the losses.

Bank stocks started December on a high note. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) gained 1.07% and 1.43%. However, it was a negative session for the main components of the Nikkei.

Softbank Group Corp. (9948) and Fast Retailing Co. Ltd. (9983) saw losses of 1.66% and 1.04%, respectively. KDDI Corp. (9433) fell by 0.82%. Sony Group Corp. (6758) and Tokyo Electron Ltd. (8035) declined by 0.78% and 0.73%.

For upcoming economic events, check out our economic calendar.