Hang Seng Index, ASX 200, Nikkei 225 Index: Economic Indicators Loom, Casting Shadow Over Positive Gains

Key Insights:

• Asian equity markets, led by the Nikkei, showed signs of recovery on Monday as Beijing announced measures to support Chinese stocks.
• While Beijing offered support, fundamental issues with the Chinese economy persist, keeping investors on edge.
• US consumer confidence, JOLTs Job Openings, and the risk of sticky inflation and wage growth are key factors to watch this week.

Monday Overview

The Asian equity markets were in recovery mode on Monday. The Nikkei led the Hang Seng Index and the ASX 200 as investors responded to further measures from Beijing.

On Sunday, Beijing announced plans to reduce stock trading stamp duties to support the Chinese markets. Investors responded favorably to the news that followed housing sector measures to support the ailing real estate sector.

There were no economic indicators from China to spook investors. However, investors remained cautious following hawkish Fed chatter and ahead of private sector PMI numbers from China this week.

Investors May Hit Pause Ahead of Key Stats

On Monday, the Hang Seng Index eased back from an early session high. While Beijing moves to steady the Chinese equity markets offered support, fundamental issues with the Chinese economy persist.

On Thursday and Friday, NBS private sector PMIs and the all-important Caixin Manufacturing PMI will show whether the Chinese economy is turning a corner. However, the risk of weaker numbers will likely test buyer appetite.

It could be a trickier Tuesday session. Investors will likely also consider US consumer confidence and JOLTs Job Openings out later today. A spike in US consumer confidence, an upswing in job openings, and a rise in quit rates would support a hawkish Fed.

With US core PCE price index numbers and the US Jobs Report also out this week, the economic calendar can materially impact buyer appetite. Investors should consider the threat of sticky inflation and a pickup in wage growth.

The NASDAQ rose by 0.84% on Monday, with the S&P 500 and the Dow seeing gains of 0.63% and 0.62%, respectively. We expect the overnight moves to cushion any downside.

ASX 200

The ASX 200 found support from US equity market gains from Friday and the latest measures from Beijing. Australian retail sales rebounded in July, rising by 0.5%. However, the Women’s World Cup drove consumption, limiting the impact of the upbeat numbers on sentiment toward RBA monetary policy.

On Monday, The National Australia Bank (NAB) and The Commonwealth Bank of Australia (CBA) rose by 1.33% and 1.22%, respectively. Westpac Banking Corp (WBC) and ANZ Group (ANZ) ended the day up 0.28% and 0.99%, respectively.

Mining stocks had a mixed session. Rio Tinto (RIO) and BHP Group Ltd (BHP) gained 0.72% and 1.23%, respectively, while Newcrest Mining (NCM) ended the day flat. Fortescue Metals Group (FMG) tumbled by 5.06% as investors responded to a sharp fall in full-year profits and a cut in the dividend payout.

BHP and FMG have delivered disappointing earnings results, which could test buyer appetite for mining stocks ahead of the China PMIs.

Oil stocks also had a mixed session. Woodside Energy Group (WDS) rose by 0.88%, while Santos Ltd (STO) fell by 1.17%.

Hang Seng Index

The Hang Seng Index partially recovered the Friday loss, gaining 0.97%. China measures to support stocks contributed, while caution led to a pullback from session highs. Concerns over the Chinese economic outlook capped the upside. We expect investors to remain jittery over China until economic indicators signal an improving macroeconomic environment.

The main Index components contributed to the positive session. Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) rose by 1.60% and 1.63%, respectively.

Bank stocks also enjoyed a positive session. Bets on the Fed standing pat on interest rates added to the more bullish mood. HSBC Holdings PLC and China Construction Bank (HK: 0939) saw gains of 0.60% and 0.98%, respectively. The Industrial and Commercial Bank of China (HK:1398) rallied 1.45%.

Nikkei 225

(For reference purposes only)

The Nikkei 225 rallied 1.73% on Monday. Bank of Japan Governor Ueda comments from Jackson Hole provided support. Ueda justified the ultra-loose policy stance on below-target inflation. Investor sentiment toward inflation, Bank of Japan forward guidance, the regional economic outlook, and the USD/JPY remain the focal points. A stronger USD/JPY is Nikkei-positive.

Banks ended the day in positive territory. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group rose by 0.89% and 1.67%, respectively.

Tokyo Electron Limited (8035) led the way, gaining 2.42%, with Fast Retailing Co (9983) and Sony Corp. (6758) rising by 1.60% and 1.18%, respectively. KDDI Corp. (9433) ended the day up a more modest 0.21%.

SoftBank Group Corp. (9984) bucked the broader market trend, slipping by 0.02%.

Check out our economic calendar for economic events.