Hang Seng Index, ASX 200, Nikkei 225 Index: Focus Remains on the Middle East Conflict

Key Insights:

• The Asian equity markets kicked off the week in a negative mood, with the Nikkei stumbling on Monday.
• Weekend news updates on the Middle East conflict weighed on market risk sentiment.
• However, the Asian futures signal a rebound, with the Asian markets ready to track the US equity markets into positive territory.

Overview of the Monday Session

On Monday, the Nikkei suffered a heavy loss, with the Hang Seng Index and the ASX200 also ending the session in negative territory.

Market jitters over the prospects of a Fed interest rate hike lingered on Monday. The Michigan Consumer Sentiment Index tumbled on a spike in consumer inflation expectations. Dovish Fed commentary failed to support the appetite for riskier assets. On Friday, FOMC voting member Patrick Harker voiced preference to leave interest rates unchanged.

On Friday, the Nasdaq Composite Index and S&P 500 declined by 1.23% and 0.50%, respectively. However, the Dow gained 0.12%.

Geopolitical tensions added to the market stress on Monday. Weekend news updates about the Middle East conflict negatively impacted market risk sentiment.

There were no economic indicators from the Asian region to distract investors during the Monday session. Better-than-expected US banking sector earnings results failed to support Asian bank stocks. Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC) beat estimates.

The Tuesday Session: Futures Signal a Rebound

A positive start to the week for the US equity markets may give the Asian markets a boost on Tuesday. A pullback in Brent Crude and WTI Crude oil reflected hopes that diplomatic channels could alleviate the threat of a prolonged Middle East conflict.

Easing bets on a Fed rate hike contributed to the US equity market gains. FOMC voting member Patrick Harker stood by his Friday guidance, supporting a hold on interest rates.

On Monday, the Dow and S&P 500 saw gains of 0.93% and 1.06%, with the Nasdaq Composite Index up 1.20%.

There are no economic indicators from the Asian region to spook investors on Tuesday. However, the RBA meeting minutes may influence ASX 200 trends after the pickup in inflationary pressures in August.

Beyond the economic calendar, news updates from the Middle East will remain a focal point.

In the Futures Markets, the ASX 200 and the Nikkei 225 were up 48 points and 310 points, respectively.

ASX 200

The ASX 200 fell by 0.36% on Monday. Tech stocks were a drag on the ASX 200. The S&P/ASX All Technology Index (XTX) tumbled by 2.10%. The big four banks also ended the session in negative territory.

Westpac Banking Corp (WBC) fell by 0.79%, with The National Australia Bank (NAB) and ANZ Group (ANZ) declining by 0.65% and 0.62%. The Commonwealth Bank of Australia (CBA) ended the session down 0.30%.

Mining stocks had a positive session. Rio Tinto (RIO) gained 0.85%, with BHP Group Ltd (BHP) and Fortescue Metals Group (FMG) gaining 0.38% and 0.33%. Newcrest Mining (NCM) rallied 3.31%.

Oil stocks also ended the day in positive territory. Woodside Energy Group (WDS) and Santos Ltd (STO) rose by 0.87% and 0.26%.

Hang Seng Index

On Monday, the Hang Seng Index declined by 0.97%. Investors continued to shun the real estate sector. The Hang Seng Mainland Properties Index (HSMPI) fell by 2.04%.

Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) saw losses of 1.57% and 1.83%.

Bank stocks had a mixed session. China Construction Bank (HK:0939) and HSBC Holdings PLC (HK:0005) fell by 0.22% and 1.12%, respectively. The Industrial and Commercial Bank of China (HK:1398) ended the session flat.

Nikkei 225

(Graph for reference purposes only)

The Nikkei took the biggest hit, sliding by 2.03% on Monday.

Bank stocks saw relatively modest losses. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group (8306) declined by 0.47% and 0.08%. However, the main components of the Nikkei saw heavy losses.

Tokyo Electron Limited (8035) slid by 3.84%, with SoftBank Group Corp. (9984) and KDDI Corp. (9433) falling by 2.04% and 2.00%. Fast Retailing Co (9983) and Sony Corp. (6758) ended the day down 1.91% and 1.87%.

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