Hang Seng Index, ASX 200, Nikkei 225 Index: Navigating US Inflation Fears and China’s Trade Outlook

Key Insights:

• Positive Thursday for Asian markets. The Hang Seng, Nikkei 225, and ASX200 all registered gains.
• The pre-US CPI Report Fed pivot drove demand for Asian equities on Thursday.
• However, surprising US CPI numbers hinted at a possible Fed rate hike, impacting the US equity markets.

Overview of the Thursday Session

It was a positive Thursday session for the Asian equity markets. The Hang Seng Index and Nikkei 225 made solid gains, with the ASX200 also enjoying a session in positive territory.

Overnight economic indicators from the US failed to restrain the market bets on a Fed pivot. Dovish Fed speeches continued to resonate, muting the impact of hotter-than-expected US producer price numbers for September on riskier assets.

The US equity markets set the tone for the Thursday session. On Wednesday, the Nasdaq composite index gained 0.71%. The Dow and S&P 500 ended the day up 0.19% and 0.43%, respectively.

Economic indicators from Japan and an escalation in the Middle East conflict failed to spook investors.

Machinery orders from Japan continued to highlight a weak demand environment. However, hopes of a stimulus-fueled pickup in economic activity in China poured cold water on the weaker-than-expected numbers. Machinery orders fell by 0.5% in August vs. a 1.1% decline in July. Economists forecast a 0.4% increase.

The Friday Session: US CPI Report and China Trade in Focus

Overnight US economic indicators from Thursday will set the tone of the Asian session. A hotter-than-expected US CPI Report reignited bets on a Fed interest rate hike. The numbers surprised the markets and left the US equity markets in negative territory for the Thursday session.

The Nasdaq Composite Index and the S&P 500 declined by 0.63% and 0.62%, with the Dow falling by 0.51%.

However, economic indicators from China will move the dial. Inflation and trade data for September will be in focus early in the Asian market session. While the inflation numbers need consideration, the trade data will likely have more impact on market risk sentiment.

Economists forecast the USD trade surplus to widen from $68.36 billion to $70 billion in September. However, investors should consider the import and export numbers. A less marked decline in imports and exports year-over-year would signal an improving macroeconomic environment.

While the economic indicators will influence market risk sentiment, stimulus talk and news updates from the Middle East also warrant consideration. An escalation in the Middle East conflict may fuel a pre-weekend flight to safety.

In the Futures Markets, the ASX 200 and the Nikkei 225 were down 58 points and 370 points, respectively.

ASX 200

The ASX 200 gained 0.04% on Thursday. Tech stocks benefited from the risk-on mood, with the S&P/ASX All Technology Index (XTX) gaining 0.96%. The big four banks and mining stocks also enjoyed positive sessions.

Rio Tinto (RIO) and Fortescue Metals Group (FMG) saw gains of 0.93% and 0.80%, with BHP Group Ltd (BHP) rising by 0.25%. Newcrest Mining (NCM) rallied 2.06%.

The Commonwealth Bank of Australia (CBA) and the National Australia Bank (NAB) rose by 0.95% and 0.92%. ANZ Group (ANZ) and Westpac Banking Corp (WBC) ended the day up 0.82% and 0.89%.

However, oil stocks struggled. Woodside Energy Group (WDS) and Santos Ltd (STO) fell by 0.06% and 1.55%, respectively.

Hang Seng Index

On Thursday, the Hang Seng Index rallied 1.93%. The Hang Seng Mainland Properties Index (HSMPI) gained 1.20%, offering support for the second consecutive session.

Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) saw gains of 1.48% and 1.80%.

Bank stocks enjoyed a breakout session. China Construction Bank (HK:0939) and the Industrial and Commercial Bank of China (HK:1398) rallied 5.63% and 4.81%, respectively. News of Central Huijin Investment increasing its stake in Chinese banks drove demand for Chinese bank stocks. The Ministry of Finance controls Central Huijin Investment.

HSBC Holdings PLC (HK:0005) rose by 0.64%.

Nikkei 225

(Graph for reference purposes only)

The Nikkei rallied 1.75% on Thursday.

Bank stocks benefitted from the positive sentiment. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group (8306) rose by 0.33% and 0.76%. However, the main components of the Nikkei had a mixed session.

Tokyo Electron Limited (8035) and Sony Corp. (6758) gained 2.94% and 3.15%, respectively. Fast Retailing Co (9983) and SoftBank Group Corp. (9984) ended the day up 1.23% and 1.10%.

However, KDDI Corp. (9433) bucked the trend, falling 1.15%.

For upcoming economic events, check out our economic calendar.