Hang Seng Index, ASX 200, Nikkei 225: Futures Flash Red on Geopolitics

Highlights

• The Nikkei continued to make gains on Friday, while the ASX 200 and the Hang Seng Index ended the session in negative territory.
• Economic indicators from China tested the appetite for riskier assets amid easing bets on a Bank of Japan pivot from negative rates.
• On Monday, the Asian equity markets will react to US producer prices and Australian employment data.

Overview of the Friday Session

On Friday, the Nikkei continued its impressive start to 2023. However, the ASX 200 and Hang Seng Index ended the session in negative territory.

Overnight US economic indicators from Thursday set the tone for the Asian Friday session.

The US CPI Report influenced buyer appetite for riskier assets. The US annual inflation rate accelerated from 3.1% to 3.4% in December, while core inflation softened from 4.0% to 3.9%. Softer core inflation figures countered hotter-than-expected headline inflation numbers, raising bets on a March Fed rate cut.

According to the CME FedWatch Tool, the probability of a March rate cut increased from 64.7% to 71.8% after the CPI Report.

On Thursday, the Nasdaq Composite Index ended the session flat, with the S&P 500 falling by 0.07%. The Dow gained 0.04%. 10-year US Treasury yields hit a session high of 4.068% before ending the day at 3.968%.

However, economic indicators from China impacted buyer demand for riskier assets. Deflationary pressures overshadowed better-than-expected trade data. Producer prices fell by 2.7% in December after falling by 3.0% in November. Economists forecast a 2.6% decline.

Beyond the economic calendar, concerns about the Red Sea contributed to the ASX 200 and Hang Seng losses.

US Producer Prices to Set the Tone for Monday

On Monday, US producer prices, bank earnings from Friday, and moves across the US equity market will set the tone for the Asian session. Producer prices declined by 0.1% in December, suggesting a softer inflation outlook. However, core producer prices stalled for the second month, signaling price stability.

The US equity markets had another mixed session. The Dow declined by 0.31%, while the S&P 500 and Nasdaq Composite Index rose by 0.06% and 0.02%, respectively. 10-year US Treasury yields fell by 0.68% on Friday, ending the session at 3.941%.

On Monday, Australian labor market data could influence consumer-linked stocks on the ASX 200. However, Bank of Japan commentary, stimulus chatter from Beijing, and geopolitics also need consideration.

In the futures markets, the ASX 200 and the Nikkei were down 11 and 70 points, respectively.

ASX 200

The ASX 200 declined 0.10% on Friday. Gold and oil stocks recorded gains, while bank and mining stocks had mixed sessions. Tech stocks also struggled, with the S&P ASX All Technology Index (XTX) declining by 0.07%.

Gold (XAU/USD) and oil stocks limited the downside on Friday. Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. (EVN) gained 1.64% and 1.59%, respectively. Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) ended the day up 0.45% and 1.48%, respectively.

Mining and bank stocks had a mixed session. Fortescue Metals Group Ltd. (FMG) and Rio Tinto Ltd. (RIO) ended the day up 1.22% and 0.58%. BHP Group Ltd (BHP) declined by 0.21%.

ANZ Group Holdings Ltd (ANZ) fell by 0.61%, with Westpac Banking Corp. (WBC) and National Australia Bank Ltd. (NAB) declining by 0.22% and 0.19%, respectively. Commonwealth Bank of Australia (CBA) bucked the trend, gaining 0.03%.

Hang Seng Index

The Hang Seng Index resumed its downward trajectory, falling 0.35% on Friday. The Hang Seng Tech Index (HSTECH) fell by 0.92%. Property stocks also ended the day in negative territory. The Hang Seng Mainland Properties Index (HSMPI) slid by 1.85%.

Alibaba (9988) fell by 0.42%, while Tencent (0700) gained 0.35%.

Bank stocks also had a mixed session. HSBC (0005) slid by 2.38%. China Construction Bank (0939) and Industrial Commercial Bank (1398) saw gains of 0.22% and 0.27%, respectively.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei rose by 1.50% on Friday, ending the session at 35,577.

Bank stocks ended Friday in negative territory. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) saw losses of 1.38% and 1.05%, respectively. However, it was another positive session for the main components of the Nikkei.

Fast Retailing Co. Ltd. (9983) surged by 6.34%. KDDI Corp. (9433) and Sony Group Corp. (6758) saw gains of 1.09% and 1.64%, respectively. Tokyo Electron Ltd. (8035) and Softbank Group Corp. (9948) ended the day up 0.65% and 0.31%, respectively.

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