Hang Seng Index, ASX 200, Nikkei 225: The PBoC and Japanese Trade Data in Focus

Highlights

• Property woes in China sent the Hang Seng Index into negative territory on Tuesday, while the Bank of Japan fueled a Nikkei rally.
• Overnight US equity market gains will set the tone for the Wednesday session.
• On Wednesday, trade data from Japan and the PBoC are in focus.

Overview of the Monday Session

On Tuesday, the Hang Seng Index ended the session in negative territory, while the Nikkei and ASX 200 enjoyed positive sessions.

The US equity markets set the tone for the Tuesday session. Despite hawkish Fed commentary, the Nasdaq Composite Index and the S&P 500 saw gains of 0.62% and 0.45%, respectively. The Dow ended the session flat.

Overnight US economic indicators from Monday drove demand for riskier assets. Housing market conditions improved in December, supported by a pullback in mortgage rates. The NAHB Housing Market Index increased by more than expected. Economists consider US housing sector data as leading economic indicators for the US economy.

On Tuesday, investors brushed aside hawkish RBA Meeting Minutes. The markets expect RBA rate cuts in 2024 despite the RBA considering a December rate hike. Overnight demand for US tech stocks drove buyer appetite for Asian tech stocks on rate cut bets.

The Bank of Japan’s monetary policy decision to leave rates in negative territory sank the Japanese Yen. A weaker USD/JPY supported buyer appetite for export stocks.

However, property sector woes in China left the Hang Seng Index in negative territory.

US Housing Sector Data and Fed Chatter in Focus

On Wednesday, overnight US economic indicators from Tuesday need consideration. Better-than-expected housing sector data fueled expectations of a soft landing. Housing starts surged by 14.8% in November, while building permits declined by 2.5%.

On Tuesday, the US equity had a positive session despite more hawkish Fed commentary. FOMC member Raphael Bostic favored two rate cuts for 2024 vs. market bets on rates dropping below 4.5%. The Nasdaq Composite Index gained 0.66%, with the Dow and S&P 500 rising by 0.60% and 0.59%, respectively.

The PBoC and Trade Data from Japan in the Spotlight

On Wednesday, the Asian economic calendar warrants investor attention. Trade data from Japan could influence market bets on a Bank of Japan pivot from negative rates. A weak macroeconomic environment continues to leave the BoJ on a cautious footing. However, an improving macroeconomic environment could allow pivot discussions to begin in earnest.

The PBoC could also influence market risk sentiment. Economists expect the PBoC to leave loan prime rates unchanged. However, unexpected moves to bolster the economy could drive demand for riskier assets.

ASX 200

The ASX 200 gained 0.84% on Tuesday. Tech stocks contributed, with the S&P ASX All Technology Index (XTX) ending the day up 1.32%. However, gains were broad-based, with banks, energy, gold, mining, and oil stocks ending the session in positive territory.

Gold (XAU/USD) stocks Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. (EVN) rallied 1.36% and 1.06%, respectively.

BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) ended the day up 0.57% and 0.74%, with Fortescue Metals Group Ltd. (FMG) gaining 1.08%.

The big four banks also had a positive session. Westpac Banking Corp. (WBC) and Commonwealth Bank of Australia (CBA) rose by 0.76% and 0.55%, respectively. ANZ Group Holdings Ltd (ANZ) and National Australia Bank Ltd. (NAB) saw gains of 0.39% and 0.53%, respectively.

Oil stocks had a mixed session. Woodside Energy Group Ltd (WDS) rose by 1.71%, while Santos Ltd (STO) ended the session flat.

Hang Seng Index

The Hang Seng Index declined by 0.75% on Tuesday. The Hang Seng Tech Index (HSTECH) fell by 0.61%, with the Hang Seng Mainland Properties Index (HSMPI) sliding by 3.25%.

Alibaba (9988) declined by 0.62%, while Tencent (0700) rose by 0.06%.

Bank stocks had another negative session. HSBC (0005) slipped by 0.08%. China Construction Bank (0939) and Industrial Commercial Bank (1398) ended the day down 0.44% and 0.54%, respectively.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei rallied 1.41% on Tuesday.

Bank stocks had a mixed session. Sumitomo Mitsui Financial Group Inc. (8316) gained 0.65%, while Mitsubishi UFJ Financial Group Inc. (8306) declined by 1.13%, respectively. However, it was a positive session for the main components of the Nikkei.

Tokyo Electron Ltd. (8035) and Fast Retailing Co. Ltd. (9983) rallied 3.67% and 2.19%, respectively.

Sony Group Corp. (6758) and Softbank Group Corp. (9948) saw gains of 0.42% and 0.86%, respectively. KDDI Corp. (9433) inched 0.07% higher.

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