Hang Seng Index, ASX 200, Nikkei 225: HSI Set for a Post-Holiday Fall

Highlights

• The Nikkei enjoyed a breakout session on Tuesday, while the ASX 200 ended the session in negative territory. The Hang Seng Index (HSI) reopens on Wednesday.
• On Wednesday, the US CPI Report from Tuesday will influence market risk sentiment.
• Investors must also consider corporate earnings during the Asian trading session.

Overview of the Tuesday Session

On Tuesday, the Nikkei enjoyed a breakout session. However, the ASX 200 ended the session in negative territory. There was no trading of the Hang Seng Index. The Hong Kong markets were closed for trading and will reopen on Wednesday.

US economic indicators and the US equity market session from Monday set the tone for the session. On Monday, the Nasdaq Composite Index and S&P 500 declined by 0.30% and 0.09%, respectively. 10-year US Treasury yields rose by 0.10% to 4.181%, pressuring the pair. However, the Dow ended the day up 0.32%.

During the Tuesday Asian session, economic indicators from Japan and Australia and corporate earnings also drew investor interest. Australian corporate earnings and forward guidance overshadowed improving consumer confidence.

Producer price figures from Japan failed to drive bets on a Bank of Japan pivot from negative rates. A stronger USD/JPY drove buyer demand for export-linked Nikkei stocks.

The US CPI Report, Corporate Earnings, and the Fed

On Wednesday, investors will likely take their cues from the US session on Tuesday. The all-important US CPI Report took center stage. The US annual inflation rate declined from 3.4% to 3.1% in January, with the core inflation rate holding steady at 3.9%. Economists forecast annual inflation and core inflation rates of 2.9% and 3.7%, respectively.

The hotter-than-expected inflation numbers wiped bets on pre-June Fed rate cuts.

10-year US Treasury yields rose by 3.28% on Tuesday, ending the session at 4.318%. The US equity markets responded to the CPI Report and reduced bets on H1 2024 Fed rate cuts. On Tuesday, the Dow and S&P 500 fell by 1.35% and 1.37%, respectively. The Nasdaq Composite Index slid by 1.80%.

While the US session will set the tone, the Asian earnings calendar and central bank chatter also need consideration. Significantly, the Hong Kong markets reopen after the Chinese New Year holidays. Early movements could also influence sentiment across the broader Asian markets. A stronger USD/JPY is unlikely to offset the shift in market bets on Fed rate cuts.

On Wednesday, the ASX 200 and Nikkei futures down 111 and 460 points, respectively.

ASX 200

The ASX 200 declined by 0.15% on Tuesday. CSL hit the healthcare sector for a second successive session. A weaker outlook left CSL delivered another heavy loss. Macquarie contributed to the losses, with net profits down year-over-year.

Tech stocks also ended the day in negative territory. The S&P ASX All Technology Index (XTX) slid by 1.24%. Tech stocks tumbled on investor caution before the US CPI Report.

The big four banks had a positive session despite Macquarie’s earnings results. ANZ Group Holdings Ltd (ANZ) and National Australia Bank Ltd. (NAB) gained 0.61% and 0.86%, respectively. Westpac Banking Corp. (WBC) and Commonwealth Bank of Australia (CBA) rose by 0.20% and 0.23%, respectively.

However, mining stocks had a mixed session. BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) gained 0.54% and 0.05%, respectively. Fortescue Metals Group Ltd. (FMG) bucked the trend, falling by 0.74%.

Oil stocks and Gold (XAU/USD) also had a mixed session. Woodside Energy Group Ltd (WDS) declined by 0.13%, while Santos Ltd (STO) gained 0.54%. Northern Star Resources Ltd. (NST) rose by 0.99%, while Evolution Mining Ltd. ended the day flat.

Hang Seng Index

The Hang Seng Index was closed on Tuesday for Chinese New Year.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei rallied 2.89% on Tuesday. Significantly, the Nikkei touched 38,000 for the first time since 1990 before easing back.

Bank stocks ended the session in positive territory. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) ended the day up 1.55% and 1.77%, respectively.

The main components of the Nikkei also had a positive session.

Tokyo Electron Ltd. (8035) surged by 13.33% as investors reacted to the firm raising its earnings guidance. Softbank Group Corp. (9948) rallied 6.27% on another Arm Holdings breakout.

Sony Group Corp. (6758) gained 3.51%. KDDI Corp. (9433) and Fast Retailing Co. Ltd. trailed the front-runners, rising by 1.79% and 1.13%, respectively.

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