Hang Seng Index, ASX 200, Nikkei 225: The Bank of Japan in the Spotlight

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Published: Jan 22, 2024, 23:37 UTC

Overnight gains from Wall Street will set the tone for Tuesday. However, China, the Bank of Japan, and the Asian economic calendar need consideration.

Highlights

On Monday, the ASX 200 and Nikkei kick-started the week with solid gains, while the Hang Seng Index ended the day in negative territory.
On Tuesday, investors will respond to overnight US data from Monday and the US equity market session.
The Bank of Japan monetary policy decision and economic indicators from Australia also need consideration.

Overview of the Monday Session

On Monday, the ASX 200 and the Nikkei kick-started the week with solid gains. However, the Hang Seng Index continued to trend lower.

US economic indicators from Friday and gains across the US equity markets set the tone for the Monday session. The Michigan Consumer Sentiment Index increased from 69.7 to 78.8 in January, supporting expectations of a soft landing. Hopes of a soft landing countered reducing bets on a March Fed rate hike, driving demand for riskier assets.

On Friday, the Nasdaq Composite Index rallied 1.70%. The Dow and S&P 500 ended the day up 1.05% and 1.23%, respectively. 10-year US Treasury yields pulled back from session highs, influencing investor appetite for riskier assets.

However, the Asian economic indicators also warranted investor attention. On Monday, the PBoC left the 1-year and 5-year loan prime rates unchanged at 3.45% and 4.20%, respectively. The PBoC’s decision to leave loan prime rates unchanged impacted demand for Hang Seng-listed stocks.

US CB Leading Index, the Bank of Japan, and Australian Business Confidence

On Tuesday, overnight US economic indicators from Monday and the US equity markets will influence the Asian session.

The US CB Leading Index fell by 0.1% in December after declining by 0.5% in November. Waning consumer confidence, a weaker manufacturing sector, and the interest rate environment were notable influences. Economists forecast the Index to decline by 0.3%.

The US equity markets responded to the better-than-expected December numbers. On Monday, the Dow gained 0.36%, with the Nasdaq Composite Index and S&P 500 rising by 0.32% and 0.22%, respectively.

On Tuesday, the Asian economic calendar needs consideration. Australian business confidence figures for December will garner investor interest. Improving business sentiment could drive demand for ASX-listed bank stocks.

However, the Bank of Japan interest rate decision is the main event. The markets expect the BoJ to leave interest rates in negative territory. Forward guidance on inflation, the economy, and a pivot from negative rates would impact Nikkei-listed stocks.

Beyond the economic calendar, investors must monitor stimulus chatter from Beijing.

On Tuesday, the ASX 200 and the Nikkei futures were up 19 and 40 points, respectively.

ASX 200

ASX200 230124 Daily Chart

The ASX 200 rose by 0.75% on Monday. Gains were broad-based, with gold, oil, mining, and bank stocks contributing. Tech stocks consolidated gains from Friday. The S&P ASX All Technology Index (XTX) ended the day up 0.90%.

Gold (XAU/USD) stocks had a mixed session as Evolution Mining Ltd. (EVN) resumed trading. Northern Star Resources Ltd. (NST) gained 0.90%, while Evolution Mining Ltd. declined by 1.26%.

Mining stocks and oil stocks had a positive start to the week. Fortescue Metals Group Ltd. (FMG) and BHP Group Ltd (BHP) ended the day with gains of 0.91% and 0.26%, respectively. Rio Tinto Ltd. (RIO) gained 0.02%. Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) rose by 0.74% and 0.26%, respectively.

However, bank stocks led the way on Monday. ANZ Group Holdings Ltd (ANZ) and Commonwealth Bank of Australia (CBA) rallied 1.42% and 1.34%, respectively. Westpac Banking Corp. (WBC) and National Australia Bank Ltd. (NAB) ended the day up 1.08% and 1.12%, respectively.

Hang Seng Index

HSI 230124 Daily Chart

The Hang Seng Index slid by 2.27% on Monday. Property stocks tumbled as investors reacted to the PBoC decision on loan prime rates. The Hang Seng Mainland Properties Index (HSMPI) ended the session down 6.94%. Tech stocks also ended the session in negative territory. The Hang Seng Tech Index (HSTECH) slid by 3.02%.

Alibaba (9988) and Tencent (0700) declined by 0.15% and 3.32%, respectively.

Bank stocks also ended the session with losses. HSBC (0005) fell by 0.26%. China Construction Bank (0939) and Industrial Commercial Bank (1398) declined by 1.59% and 1.39%, respectively.

The Nikkei 225

Nikkei 230124 Daily Chart

(Graph for reference purposes only)

The Nikkei continued to climb, rallying 1.62%.

Bank stocks had a positive session. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) gained 1.28% and 1.08%, respectively.

It was also a positive session for the main components of the Nikkei. Softbank Group Corp. (9948) rallied 2.41%. Sony Group Corp. (6758) and Fast Retailing Co. Ltd. (9983) ended the day up 1.89% and 1.98%, respectively.

Tokyo Electron Ltd. (8035) and KDDI Corp. (9433) rose by 1.66% and 1.54%, respectively.

For upcoming economic events, check out our economic calendar.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.