Hang Seng Index, ASX 200, Nikkei 225: Navigating Fed Winds Amid Beijing Hopes

Key Insights:

• Hang Seng, ASX 200, and Nikkei faced a bearish session on Thursday, led by ASX 200.
• Hot US retail sales figures and FOMC minutes heighten Fed rate hike fears.
• Hope for a Beijing stimulus package cushioned the markets on Thursday and could influence the Friday session.

Thursday Overview

It was another bearish session on Thursday, with the Hang Seng Index and the broader Asian markets struggling. The ASX 200 led the Hang Seng Index and the Nikkei into negative territory for the second session.

There were no economic indicators from China to influence, while stats from Japan and Australia drew interest as investors responded to the Wednesday FOMC meeting minutes. Hotter-than-expected US retail sales figures from Tuesday and the FOMC meeting minutes raised the threat of further Fed interest rate hikes to tame inflation. The more hawkish Fed policy outlook weighed on riskier assets.

However, hopes for a more meaningful stimulus package from Beijing cushioned the downside on Thursday.

China and the Fed Remain Market Headwinds Today

US economic indicators from overnight included jobless claims and Philly Fed Manufacturing Index numbers, which beat forecasts. Significantly, initial jobless claims fell from 250k to 239k versus a forecasted 240k. The latest numbers tested the softer US labor market theory while supporting the more hawkish Fed monetary policy outlook.

In August, the Philly Fed Manufacturing Index increased from -13.5 to 12.0 versus a forecasted -10.0, also bullish. However, the devil was in the details. While the Philly Fed Employment Index fell from -1.0 to -6.0, the Price Paid Index surged from 9.50 to 20.80, supporting more policy maneuvers to tackle inflation.

The US equity markets continued to reflect the shift in sentiment toward Fed monetary policy.

On Thursday, the NASDAQ Composite declined by 1.17%. The Dow and the S&P 500 ended the day down 0.77% and 0.84%, respectively.

This morning, economic indicators from Japan will influence sentiment toward the Bank of Japan and the ultra-loose monetary policy stance. Inflation figures for July are in focus. However, the lack of economic indicators from Australia and China will leave investors to monitor for Beijing stimulus-related news.

ASX 200

The ASX 200 declined by 0.68% on Thursday, with hawkish Fed bets and China’s economic troubles weighing on investor sentiment. Disappointing employment figures from Australia were also bearish despite closing the door on an RBA interest rate hike.

On Thursday, The National Australia Bank (NAB) and Westpac Banking Corp (WBC) saw losses of 2.08% and 1.93%, respectively. The Commonwealth Bank of Australia (CBA) and the ANZ Group (ANZ) declined by 0.14% and 0.93%, respectively.

However, mining stocks had a mixed session on speculation of a stimulus package from Beijing. Rio Tinto (RIO) gained 1.08%, while BHP Group Ltd (BHP) ended the session flat. Fortescue Metals Group (FMG) and Newcrest Mining (NCM) fell by 0.30% and 1.66%, respectively.

Oil stocks also had a mixed session. Woodside Energy Group (WDS) rose by 0.44%, while Santos Ltd (STO) ended the day flat.

Hang Seng Index

The Hang Seng Index slipped by 0.01% on Thursday, extending the losing streak to five sessions. While market sentiment toward the Chinese economy dragged the HSI into the red, hopes of a stimulus package from Beijing delivered an afternoon session recovery.

Considering the main Index components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) ended the day with gains of 1.22% and 0.95%, respectively.

Bank stocks had a bearish session. HSBC Holdings PLC and China Construction Bank (HK: 0939) saw losses of 1.08% and 0.49%, respectively. The Industrial and Commercial Bank of China (HK:1398) ended the day flat.

CNOOC (HK: 0883) gained 0.95% on rising oil prices.

Nikkei 225

(For reference purposes only)

The Nikkei 225 declined by 0.44% on Thursday. Disappointing economic indicators from Japan weighed on buyer appetite. While core machinery orders fell short of forecasts, trade data from Japan painted a grim picture. Japan’s trade balance tumbled from a ¥43.1 billion surplus to a ¥78.7 billion deficit in July. Notably, exports to China fell by 13.4%. A weaker USD/JPY contributed to the decline.

The banks had a bullish session. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group saw gains of 0.95% and 0.96%, respectively.

Looking at the main components, Sony Corp (6758) gained 1.00%, with SoftBank Group Corp. (9984) and Tokyo Electron Limited (8035) rising by 0.20% and 0.44%, respectively.

However, Fast Retailing Co (9983) and KDDI Corp (9433) ended the day down 1.49% and 0.19%, respectively.

Check out our economic calendar for economic events.