Hang Seng Index, ASX 200, Nikkei 225: Markets Eye on China’s Economy

Key Insights:

• Hang Seng steadies, ending a six-session decline, with ASX 200 and Nikkei showing optimism.
• Eased bets on Fed rate hikes reflect relief after the latest US CPI Report insights.
• China’s economic metrics come under the lens; investors anticipate signs of economic rejuvenation.

Overview of the Thursday Session

On Thursday, the Hang Seng Index ended a six-session losing streak, with the ASX 200 and Nikkei closing out in positive territory.

Easing bets on Fed rate hikes provided investor relief as the markets reacted further to the overnight US CPI Report. A softer annual core inflation rate was enough for investors to write off a September rate hike. However, hotter-than-expected headline inflation left a November Fed rate hike on the table.

Economic indicators from Australia contributed, with steady unemployment easing fears of a China-induced slump in hiring.

US Retail Sales, Producer Prices, and Jobless Claims to Set the Mood

The hype surrounding the US CPI Report shifted to consumption and producer prices on Thursday. Higher than-expected producer prices and a spike in retail sales would force the markets to rethink the Fed pause theory.

However, the overnight US economic indicators were market-friendly, cementing a Fed hold in September and easing bets on a November rate hike.

On Thursday, the US equity markets made gains on hopes of a US soft landing. The S&P 500 and NASDAQ Composite Index rose by 0.84% and 0.81%, respectively, with the Dow gaining 0.96%.

Chinese Economy Back in the Spotlight

Economic indicators from China will draw investor attention later this morning. Fixed asset investment, industrial production, retail sales, and unemployment figures for August will be in focus.

Investors will look for the numbers to signal a turnaround in the Chinese economy. Weaker numbers would redirect attention to Beijing, which may not be forthcoming with immediate measures to calm the markets.

Economists forecast industrial production to increase by 4.0% (July: 3.7%) year-over-year and retail sales to rise by 3.0% (July: +2.5%). Economists expect the unemployment rate to hold steady at 5.3%.

However, economists expect fixed asset investments to be the only blemish on the scorecard. Investors will likely accept softer fixed asset investments should retail sales and industrial production bounce back.

US Consumer Sentiment an Afterthought?

US industrial production and NY Empire State Manufacturing numbers are unlikely to influence investor sentiment. Following the latest inflation and retail sales figures, consumer sentiment will likely be an afterthought.

The Fed will likely brush aside manufacturing sector data and give more weighting to the overnight inflation and retail sales figures.

The US manufacturing sector represents 12% of the US economy. In contrast, US private consumption accounts for almost 70%. The tight labor market boosts wage growth, driving consumption and inflation. While rising consumer sentiment signals higher demand for US products, monitoring the Chinese economic calendar is essential.

Looking at the Futures Markets, the ASX 200 was up 88 points, with the Nikkei gaining by 220 points.

ASX 200

The ASX 200 gained 0.46% on Thursday. Bank and mining stocks provided much-needed support.

Fortescue Metals Group (FMG) jumped by 4.13%. BHP Group Ltd (BHP) and Rio Tinto (RIO) rose by 0.78% and 1.82%, respectively. Newcrest Mining (NCM) gained 0.93%.

The big four banks enjoyed a positive session. ANZ Group (ANZ) and the National Australia Bank (NAB) ended the day up 1.07% and 1.14%, respectively. The Commonwealth Bank of Australia (CBA) and Westpac Banking Corp (WBC) rose by 0.42% and 0.60%, respectively.

Oil saw modest gains. Woodside Energy Group (WDS) and Santos Ltd (STO) ended the day up 0.08% and 0.13%, respectively.

Hang Seng Index

The Hang Seng Index ended the session up 0.21% on Thursday.

Alibaba Group Holding Ltd (9988.HK) rose by 0.41%, while Tencent Holdings Ltd (0700.HK) slipped by 0.12% in a choppy session.

However, bank stocks made gains. China Construction Bank (0939.HK) and the Industrial and Commercial Bank of China (1398.HK) ended the day with gains of 1.15% and 1.07%, respectively. HSBC Holdings PLC (0005.HK) led the way, rising by 1.27%.

Nikkei 225

(Graph for reference purposes only)

The Nikkei 225 led the way, rallying 1.41% on Fed policy relief.

Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group rose by 0.54% and 0.19%, respectively.

However, the main components had a mixed session.

Tokyo Electron Limited (8035) rallied 3.03%, with Fast Retailing Co (9983) gaining 2.96%.

Sony Corp. (6758) and KDDI Corp. (9433) rose by 1.61% and 1.27%, respectively, while SoftBank Group Corp. (9984) slipped by 0.75%.

For upcoming economic events, check out our economic calendar.