Hang Seng Index, ASX 200, Nikkei 225: Service PMIs, Inflation, and the RBA in Focus

Highlights

• The Hang Seng Index and the Nikkei ended the Monday session in negative territory, while the ASX 200 wrapped up the day in positive territory.
• Market concerns about the Chinese economy continued to impact the Hang Seng Index, with a stronger Yen affecting the Nikkei.
• On Tuesday, service sector PMIs and the RBA interest rate decision are focal points.

Overview of the Monday Session

Fed Chair Powell’s dovish speech from Friday set the tone for the Monday Asian session. Rising bets on a Q1 2024 Fed rate cut supported riskier assets. On Friday, the Dow gained 0.82%, with the Nasdaq Composite Index and the S&P 500 ending the day up 0.55% and 0.59%, respectively. 10-year US Treasury yields tumbled by 3.03%, ending the session at 4.197%.

However, the Asian equity markets had a mixed start to the week. The Hang Seng Index and the Nikkei ended the session in negative territory. However, the ASX 200 bucked the trend before the RBA rate decision (Tues).

Concerns about the Chinese economy left the Hang Seng in negative territory, with a weaker USD/JPY weighing on the Nikkei. However, optimism toward the RBA ending its rate hike cycle delivered a positive session for the ASX 200.

Australian economic indicators failed to dampen the mood despite a larger-than-expected fall in company gross profits. However, a jump in home loans contributed to the gains. The housing sector is a litmus test of the economy. An improving housing sector boosts consumer confidence and consumption.

US Factory Orders and the RBA in the Spotlight

Overnight US economic indicators from Monday will set the tone for the Tuesday Asian session. US factory orders fell by 3.6% in October, supporting bets on a Q1 2024 Fed rate cut.

However, the US equity markets had a limited reaction to the numbers ahead of more influential stats on Tuesday. On Monday, the Nasdaq Composite Index fell by 0.84%, with the Dow and the S&P 500 ending the session down 0.11% and 0.54%, respectively. 10-year US Treasury yields climbed 1.33% to 4.253%.

Caution gripped the markets, with service sector PMIs (Tues), the ADP Nonfarm Report (Wed), and the US Jobs Report (Fri) likely to dictate the Fed rate path.

On Tuesday, the Asian economic calendar also warrants consideration. Service sector PMI numbers for Australia, Japan, and China will garner investor interest. A larger-than-expected increase in the Caixin Services PMI could ease jitters about the Chinese economy. Tokyo inflation numbers may fuel bets on a BoJ pivot from negative rates.

However, the RBA interest rate decision and Rate Statement will influence buyer appetite for ASX 200-listed stocks. A hawkish Rate Statement would weigh on the ASX 200.

In the Asian futures, the ASX 200 and the Nikkei were down 36 and 100 points, respectively, on Tuesday.

ASX 200

The ASX 200 gained 0.73% on Monday. Notably, the trend line rejected a break above 7,140. Tech, gold, mining, and bank stocks contributed to the positive session. The S&P ASX All Technology Index (XTX) gained 1.17% in response to the Friday pullback in Treasury yields.

Gold (XAU/USD) rallied to a Monday high of $2,148.99 before retreating. The early rally came after a 1.75% gain on Friday. Evolution Mining Ltd. (EVN) and Northern Star Resources Ltd. (NST) rallied 2.48% and 3.70%.

Mining stocks also had a positive Monday session. BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) gained 1.73% and 1.61%. Fortescue Metals Group Ltd. (FMG) ended the day up 0.36%.

Bank stocks saw more modest gains. Commonwealth Bank of Australia (CBA) National Australia Bank Ltd. (NAB) rose by 0.89% and 0.77%. ANZ Group Holdings Ltd (ANZ) and Westpac Banking Corp. (WBC) gained 0.08% and 0.56%, respectively.

However, energy stocks ended the session in negative territory. Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) declined by 1.59% and 1.16%.

Hang Seng Index

The Hang Seng Index fell by 1.09% on Monday. Real estate stocks contributed to the losses. The Hang Seng Mainland Property Index (HSMPI) slid by 2.08%.

Alibaba (9988) and Tencent (0700) declined by 1.46% and 0.69%.

Bank stocks had another mixed session. HSBC (0005) and China Construction Bank (0939) rose by 0.84% and 0.22%. Industrial and Commercial Bank (1398) ended the session flat.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei 225 ended Monday down 0.60%. A weaker USD/JPY contributed to the losses ahead of inflation numbers from Japan on Tuesday.

Bank stocks ended the day in negative territory. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) fell by 1.83% and 2.28%. However, it was a mixed Monday session for the main components of the Nikkei.

Softbank Group Corp. (9948) and Sony Group Corp. (6758) ended the day down 1.15% and 1.34%. Tokyo Electron Ltd. (8035) declined by 0.59%.

However, Fast Retailing Co. Ltd. (9983) and KDDI Corp. (9433) saw gains of 0.05% and 0.17%, respectively.

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