Hang Seng Index, ASX 200, Nikkei 225 Index: Investors Weigh Central Bank Signals Amid Global Moves

Key Insights:

• Hang Seng Index defied Tuesday’s trend, finding modest support amidst ASX 200 and Nikkei’s struggles.
• Bank of Japan’s forthcoming monetary decision casts a shadow, as the Nikkei grapples with monetary policy anxiety.
• US economic indicators lean towards positive FOMC revisions, potentially keeping a rate hike alive.

Overview of the Tuesday Session

On Tuesday, the ASX 200 and Nikkei struggled, while the Hang Seng Index found modest support to buck the broader market trend.

News of Country Garden gaining approval to extend another onshore loan drove demand for HK-listed property stocks.

However, investor jitters over Fed and Bank of Japan monetary policy decisions tempered gains. On Tuesday, the RBA meeting minutes alerted investors to a willingness among central banks to push interest rates higher.

The RBA meeting minutes showed board members considered raising the cash rate higher but decided to allow more time for the effects of interest rate hikes to filter through the economy. Members were also mindful that weaker-than-expected consumption and contagion from China could materially impact growth.

Market angst ahead of the Bank of Japan monetary policy decision weighed on the Nikkei. On Tuesday, Japanese minister of Economy, Trade, and Industry Yasutoshi Nishimura discussed negative interest rates, saying,

“But inflation is now accelerating. Given what’s happening across the globe, the policy aimed at buying time will eventually end and normalize.”

On Monday, the US equity markets flat-lined, with investors wary of the impending Fed interest rate decision and FOMC economic projections. The S&P 500 and NASDAQ Composite Index saw gains of 0.01% and 0.07%, respectively, with the Dow rising by 0.02%.

Japanese Trade and the PBoC to Set the Pre-Fed Pace

This morning, Japanese trade data for August will garner investor interest. Recent economic indicators have highlighted weak demand, suggesting a trade deficit widening. Economists forecast the trade deficit to widen from ¥78.7 billion to ¥659.1 billion, with exports to fall by 1.7% year-over-year versus a 0.3% decline in July.

Later in the morning session, the PBoC will be in focus. However, economists expect the PBoC to leave loan prime rates (LPR) unchanged. The PBoC has delivered a string of measures to support the property sector. Following better-than-expected economic data last week, investors may consider a decision to hold LPRs unchanged as a positive sign.

Fed Anxiety to Test Investor Resilience

While the PBoC and Japanese trade data will draw interest, investors will remain wary about the Fed interest rate decision. The markets are betting on the Fed hitting the pause button today. However, US economic indicators suggest upbeat revisions to the FOMC economic projections.

Upbeat revisions to the economic projections would leave a Fed rate hike on the table. Significantly, the Fed may also push back the timing of the first interest rate cut to 2025.

Looking at the Futures Markets, the ASX 200 was down 16 points, while the Nikkei gained 10 points. The NASDAQ Composite Index declined by 0.23% on Tuesday, with the Dow and S&P 500 seeing losses of 0.31% and 0.22%, respectively.

ASX 200

The ASX 200 fell by 0.47% on Tuesday. Tech stocks continued to decline, with the S&P/ASX All Technology Index (XTX) ending the day down 0.55%. Mining and the big four banks also weighed on the ASX 200.

BHP Group Ltd (BHP) and Rio Tinto (RIO) saw losses of 1.44% and 0.65%, respectively. Fortescue Metals Group (FMG) declined by 1.08%, while Newcrest Mining (NCM) bucked the trend, gaining 1.37%.

The big four banks struggled. The National Australia Bank (NAB) and ANZ Group (ANZ) ended the day down 0.68% and 0.93%, respectively. The Commonwealth Bank of Australia (CBA) and Westpac Banking Corp (WBC) saw losses of 0.49% and 0.46%, respectively.

However, oil stocks had a mixed session. Woodside Energy Group (WDS) slipped by 0.11%, while Santos Ltd (STO) gained 0.90%.

Hang Seng Index

The Hang Seng Index rose by 0.37%.

Alibaba Group Holding Ltd (9988.HK) and Tencent Holdings Ltd (0700.HK) saw gains of 0.71% and 0.06%, respectively.

Bank stocks had a mixed session. China Construction Bank (0939.HK) and the Industrial and Commercial Bank of China (1398.HK) rose by 1.61% and 1.87%, respectively. HSBC Holdings PLC (0005.HK) slipped by 0.08%.

Nikkei 225

(Graph for reference purposes only)

The Nikkei 225 ended the day down 0.87%.

Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group rallied 2.79% and 2.56%, respectively.

However, the main components had a negative session.

Tokyo Electron Limited (8035) tumbled by 5.23%, with SoftBank Group Corp. (9984) sliding by 3.29%.

Sony Corp. (6758) and Fast Retailing Co (9983) ended the day with losses of 0.97% and 1.19%, respectively. KDDI Corp. (9433) bucked the trend, rising by 0.02%.

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