Hang Seng Index, ASX 200, Nikkei 225: Japanese Economy in the Spotlight

Highlights

• The Asian equity markets returned to negative territory on Thursday.
• China debt woes and trade data countered market bets on Q1 2024 Fed rate cuts.
• On Friday, pre-US Jobs Report bets and the Asian economic calendar will influence.

Overview of the Thursday Session

On Thursday, the Asian equity markets returned to negative territory. The Nikkei 225 led the Hang Seng Index and the ASX200 into the red.

Weaker-than-expected ADP employment numbers supported bets on a Q1 2024 Fed rate cut. On Wednesday, 10-year US Treasury yields declined by 1.46% to 4.106%. However, the US equity markets ended the session with losses, setting the tone for the Thursday Asian session.

The Nasdaq Composite Index declined by 0.56%, with the Dow and S&P 500 falling by 0.19% and 0.39%, respectively.

The Asian economic calendar also impacted market risk sentiment on Thursday. Trade data from Australia and China suggested a weakening demand environment. While exports increased, imports declined, signaling a temporary spike in demand for goods.

Away from the economic calendar, Bank of Japan Governor Kazuo Ueda sank the USD/JPY and the Nikkei. The BoJ Governor discussed a pivot from negative rates and possible interest rate targets in parliament. Concerns about China contributed to the losses.

US Labor Market and US Equity Markets to Set the Tone

On Friday, overnight US economic indicators from Thursday will set the tone for the Asian session. Initial jobless claims increased from 219k to 220k in the week ending December 2. After the softer ADP numbers, a modest increase allayed immediate fears of a hard landing.

On Thursday, the Dow and S&P 500 rose by 0.17% and 0.80%, respectively. The Nasdaq Composite Index rallied 1.37%. 10-year US Treasury yields climbed by 1.10% to 4.151%.

Japanese Household Spending and GDP in the Spotlight

On Friday, the Asian economic calendar will garner investor interest. Wages, household spending, and finalized GDP numbers for Q3 will influence the Nikkei. A pickup in wage growth and household spending would fuel bets on a BoJ pivot from negative rates.

Rising bets on a BoJ pivot would weaken the USD/JPY and weigh on the Nikkei. However, downward revisions to third-quarter GDP numbers could delay an exit from negative rates.

Economists forecast household spending to fall by 0.2% in October and average cash earnings to increase by 1.4% year-over-year. In September, average cash earnings were up 1.2%, while household spending increased by 0.3%.

Beyond the numbers, crude oil prices, gold, and government bond yields need monitoring.

ASX 200

The ASX 200 tracked the US markets into the red, falling by 0.07% on Thursday. The S&P ASX All Technology Index (XTX) cushioned the downside, rising by 0.36%. Mining, oil, and gold stocks also countered losses across the big four banks.

BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) ended the day up 0.40% and 1.04%. Rising bets on a late 2024 RBA rate cut contributed. Fortescue Metals Group Ltd. (FMG) gained 1.59%.

Energy stocks had a positive session. Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) saw gains of 0.44% and 0.74%, with gold (XAU/USD) stocks also climbing. Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. (EVN) rose by 1.39% and 1.30%.

However, bank stocks contributed to the session loss. National Australia Bank Ltd. (NAB) and ANZ Group Holdings Ltd (ANZ) declined by 0.44% and 0.40%. Commonwealth Bank of Australia (CBA) slipped by 0.07%. Westpac Banking Corp. (WBC) bucked the trend, gaining 0.55%.

Hang Seng Index

The Hang Seng Index declined by 0.71% on Thursday. Concerns about the Chinese economy weighed.

Alibaba (9988) and Tencent (0700) ended the day with losses of 0.64% and 1.22%.

However, bank stocks had a mixed session. HSBC (0005) and China Construction Bank (0939) gained 0.50% and 0.23%. Industrial Commercial Bank (1398) ended the session flat.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei 225 slid by 1.76% on Thursday.

Bank stocks made gains for the second session. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) rose by 0.40% and 0.80%. It was a negative session for the main components of the Nikkei.

Tokyo Electron Ltd. (8035) and Fast Retailing Co. Ltd. (9983) slid by 3.59% and 2.06%. Softbank Group Corp. (9948) and Sony Group Corp. (6758) ended the session down 1.68% and 1.64%. KDDI Corp. (9433) fell by 1.09%.

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