Hang Seng Index, ASX 200, Nikkei 225 Index: Navigating PMIs and US Bank Downgrades

Key Insights:

• Hang Seng Index enjoyed a bullish Tuesday session, leading ASX 200 and Nikkei to favorable grounds amidst Asian market relief.
• Bank stocks may wobble post-S&P Global’s downgrade, echoing the previous downgrade by Moody’s in August.
• Private sector PMIs take center stage as cracks appear in the service sector, signaling potential shifts.

Tuesday Overview

Relief spread across the Asian markets on Tuesday. The Hang Seng Index led the ASX 200 and Nikkei into positive territory.

Tech stocks tracked the US markets into positive territory. Investors expect impressive NVIDIA (NVDA) earnings results on Wednesday.

Dip buyers jumped in, with investors seeing the Hang Seng in oversold territory. There were no economic indicators and no stimulus chatter from Beijing. Investors may see the Chinese real estate crisis as overblown. Beijing has not panicked with a wave of stimulus measures. Sometimes a flood of stimulus measures creates market panic.

There were no overnight US economic indicators to support riskier assets. However, the NASDAQ Composite rallied by 1.56%, with the S&P 500 gaining 0.69% to support the bullish Asian session.

Lingering concerns over the Chinese economy left the ASX 200 trailing its peers.

Private Sector PMIs to Influence Ahead of the Jackson Hole Symposium

Private sector PMI numbers are in focus this morning. Manufacturing sector troubles have left the services sector to carry the heavy load. However, recent PMI trends have shown cracks emerging in the services sector.

Prelim August manufacturing and services PMI from Australia and Japan will influence market risk sentiment. A deeper contraction across the manufacturing sector and a contraction across services sectors would weigh on buyer appetite.

However, investors should consider the sub-components, including new orders, output prices, and employment. A downward trend in new orders, hiring, and output prices is bearish. Falling output prices can occur when competition increases for new business.

From overnight, US existing home sale figures shouldn’t influence.

The NASDAQ gained 0.06%, while the S&P 500 and the Dow fell by 0.28% and 0.51%, respectively. Investors responded to the news of S&P Global downgrading US banks heavily exposed to the real estate sector. Energy stocks also struggled with falling oil and natural gas prices.

Bank stocks could have a bearish session today after US investors reacted to the news of S&P Global news. Moody’s Ratings downgraded US banks in early August.

ASX 200

The ASX 200 found late support, ending Tuesday up 0.09%, with the Big-4 banks making gains.

On Tuesday, Westpac Banking Corp (WBC) and The National Australia Bank (NAB) rose by 1.26% and 1.31%, respectively. ANZ Group (ANZ) and The Commonwealth Bank of Australia (CBA) saw gains of 0.25% and 0.22%, respectively.

However, mining stocks had a mixed session. Lingering China concerns tested buyer appetite. Rio Tinto (RIO) and Fortescue Metals Group (FMG) rose by 0.49% and 0.39%, respectively. Newcrest Mining (NCM) gained 1.21%, while BHP Group Ltd (BHP) fell by 0.71%. Weaker-than-expected profit and a smaller dividend payout sent BHP into the red.

Oil stocks had a bearish session because of falling crude oil prices. Woodside Energy Group (WDS) and Santos Ltd (STO) fell by 1.04% and 0.51%, respectively.

Hang Seng Index

The Hang Seng Index ended a seven-day losing streak, gaining 0.95%. Softer-than-expected inflation numbers on Monday contributed to the upside. In July, the Hong Kong annual inflation rate softened from 1.90% to 1.80%. Economists forecasted an inflation rate of 2.00%. Softer inflation reduces the chance of hawkish central bank action, a positive for riskier assets.

The main Index components had a bullish session. Alibaba Group Holding Ltd (HK:9988) gained 1.93%. Tencent Holdings Ltd (HK:0700) rose by 0.31%.

Bank stocks also found support. China Construction Bank (HK: 0939) and The Industrial and Commercial Bank of China (HK:1398) rallied 1.19% and 1.00%, respectively. However, HSBC Holdings PLC trailed, rising by 0.09%.

Nikkei 225

(For reference purposes only)

The Nikkei 225 also found support, gaining 0.92%. A stronger USD/JPY contributed.

Banks had a breakout session. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group rallied by 3.16% and 3.20%, respectively.

Looking at the main components, Tokyo Electron Limited (8035) and SoftBank Group Corp. (9984) saw gains of 1.92% and 1.40%, respectively. Sony Corp. (6758) and KDDI Corp. (9433) rose by 0.54% and 0.83%, respectively.

However, Fast Retailing Co (9983) fell by 0.24%. As the owner of Uniqlo, Fast Retailing has exposure to the China retail market.

Check out our economic calendar for economic events.