Hang Seng Index, ASX 200, Nikkei 225: Inflation Puts the Nikkei on the Spot

Summary of the Thursday Session

On Thursday, the Hang Seng Index and Nikkei led the ASX 200. Investors reacted to the overnight FOMC Economic Projections. In line with expectations, the Fed left interest rates at 5.50%. However, the Fed removed uncertainty about intentions to lower interest rates in 2024.

The FOMC projected a 2024 median Fed Funds Rate of 4.6%, unchanged from December. Growth forecasts were also market-friendly. The FOMC projected growth of 2.1% vs. 1.4% in December.

The US equity markets responded to the FOMC Economic Projections. On Wednesday, the Nasdaq Composite Index and the Dow rallied by 1.25% and 1.03%, respectively. The S&P 500 advanced by 0.89%.

Moreover, the Asian economic calendar painted a rosier picture of the macroeconomic environment. Australian labor market conditions improved in February. Service sector activity across Australia and Japan accelerated in March. Japanese exports increased more than expected, narrowing the trade deficit to ¥379.4 billion.

US Soft Landing, Japan Inflation, and the RBA in Focus

On Friday, overnight US economic indicators from Thursday and the US equity market session will set the tone for the Asian session.

The S&P Global Services PMI declined from 52.3 to 51.7 in March. Economists forecast a PMI of 52.0. Initial Jobless Claims slipped from 212k to 210k in the week ending March 16. Economists expected an increase to 215k. The Philly Fed Manufacturing Index fell from 5.2 to 3.2. Economists predicted the Index to drop to -2.3.

The economic indicators continued to support expectations of a soft landing as the markets bet on a June Fed rate cut. On Thursday, the Swiss National Bank (SNB) cut interest rates by 25 basis points, signaling a possible end to the battle against inflation. The move supported the appetite for riskier assets.

On Thursday, the Nasdaq Composite Index gained 0.20%. The Dow and S&P 500 ended the session up 0.68% and 0.32%, respectively.

Investors will likely take their cues from the US session on Friday. However, the Asian economic calendar also warrants investor attention.

Inflation figures from Japan will garner investor interest. The markets expect the BoJ to leave interest rates at zero in 2024. Hotter-than-expected inflation numbers could influence BoJ monetary policy goals. Economists forecast the annual inflation rate to accelerate from 2.2% to 3.0% in February.

Beyond the numbers, the RBA will also be in the spotlight. The RBA Financial Stability Review may impact rate-sensitive ASX-listed stocks.

On Friday, the ASX 200 futures were down 14 points, while the Nikkei futures were up by 220 points.

ASX 200

The ASX 200 gained 1.12% on Thursday. While the gains were broad-based, bank, gold, and tech stocks were among the front-runners. The S&P ASX All Technology Index (XTX) rallied 1.11%.

Gold (XAU/USD) stocks Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. saw gains of 2.31% and 5.15%, respectively.

National Australia Bank Ltd. (NAB) rallied 2.57%. Commonwealth Bank of Australia (CBA) and Westpac Banking Corp. (WBC) advanced by 2.03% and 1.87%, respectively. ANZ Group Holdings Ltd. (ANZ) ended the day up 1.12%.

Rio Tinto Ltd. (RIO) declined by 0.13%. BHP Group Ltd (BHP) and Fortescue Metals Group Ltd. (FMG) saw gains of 0.78% and 1.70%.

Woodside Energy Group Ltd (WDS) fell by 0.23%, while Santos Ltd (STO) ended the day up by 0.13%.

Hang Seng Index

On Thursday, the Hang Seng Index rallied 1.93%. Real estate contributed to the gains. The Hang Seng Mainland Properties Index (HSMPI) jumped 3.32%. The Hang Seng Tech Index (HSTECH) ended the session up by 0.89%.

Alibaba (9988) and Tencent (0700) rose by 1.82% and 0.83%, respectively.

Bank stocks also had a positive Thursday session. HSBC (0005) advanced by 2.18%. China Construction Bank (0939) and Industrial Commercial Bank (1398) saw gains of 2.75% and 1.79%, respectively.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei rallied 2.03% on Thursday.

Bank stocks ended the session in positive territory. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) advanced by 2.71% and 2.95%, respectively.

However, it was a mixed Thursday session for the main components of the Nikkei.

Softbank Group Corp. (9948) and Tokyo Electron Ltd. (8035) surged by 5.01% and 5.47%, respectively. Moreover, Fast Retailing Co. Ltd. (9983) advanced by 2.81%.

Sony Group Corporation (6758) and KDDI Corp. (9433) saw losses of 0.26% and 1.75%, respectively.

For upcoming economic events, refer to our economic calendar.