Hang Seng Index, ASX 200, Nikkei 225: The US Equity Market Rally and China

Highlights

• On Friday, the ASX 200 and Nikkei ended the week on a high note while the Hang Seng Index resumed its downward trajectory.
• On Monday, investors will respond to US data and US equity market gains from the Friday session.
• China will also be in the spotlight, with the PBoC setting loan prime rates.

Overview of the Friday Session

On Friday, the Hang Seng Index ended the session in negative territory. However, the Nikkei enjoyed a solid end to the week. Significantly, the ASX 200 ended the five-session losing streak.

Overnight US economic indicators from Thursday highlighted a resilient US economy. US initial jobless claims fell from 203k to 187k in the week ending January 13. However, the numbers failed to impact bets on a March rate cut. FOMC member Raphael Bostic provided market relief, supporting rate cuts if inflation falls faster than expected.

On Thursday, the Nasdaq Composite Index ended the session up 1.35%. The Dow and S&P 500 saw gains of 0.54% and 0.88%, respectively. Gains across the US equity markets came despite 10-year US Treasury yields climbing for the fourth consecutive session.

Asian economic indicators also garnered investor interest. Inflation numbers from Japan eased bets on a Bank of Japan pivot from negative rates. The annual inflation rate softened from 2.8% to 2.6%. Significantly, the core inflation rate edged closer to the BoJ target (2%), falling from 2.5% to 2.3%. The USD/JPY responded to the inflation figures, driving demand for Nikkei-listed export stocks.

US Consumer Sentiment, the Fed, and China in Focus

On Monday, US economic indicators from Friday and Fed comments need consideration. The Michigan Consumer Sentiment Index jumped from 69.7 to 78.8 in January. FOMC member Mary Daly talked about the economy being in a good place and needing to be more patient on monetary policy.

Positive sentiment toward the US economy countered falling bets on a March Fed rate cut. The consumer sentiment numbers suggested the US economy could perform with interest rates at current levels through Q1.

The US equity markets ended the week on a solid footing. On Friday, the Dow and S&P 500 ended the day up 1.05% and 1.23%, respectively. The Nasdaq Composite Index rallied 1.70%.

On Monday, the Asian economic calendar warrants investor attention. The PBoC will set the 1-year and 5-year Loan Prime Rates. Economists forecast the PBoC to leave the 1-year and 5-year LPRs unchanged at 3.45% and 4.20%, respectively. With the markets expecting stimulus measures from Beijing, a PBoC hold on LPRs could affect market risk sentiment.

Away from the economic calendar, geopolitical tensions in the Middle East and stimulus chatter from Beijing need monitoring.

On Monday, the ASX 200 and the Nikkei futures were up 26 and 300 points, respectively.

ASX 200

The ASX 200 rallied 1.02% on Friday, ending a five-day losing streak. Significantly, the ASX 200 broke above the trend line. Gains were broad-based, with gold, oil, mining, and bank stocks contributing to the gains. However, tech stocks led the way. The S&P ASX All Technology Index (XTX) rallied 2.04%.

Gold (XAU/USD) and oil stocks ended the session in positive territory. Northern Star Resources Ltd. (NST) rose by 0.49%. Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) ended the day up 1.64% and 0.92%, respectively.

Mining stocks had a positive session. Fortescue Metals Group Ltd. (FMG) and Rio Tinto Ltd. (RIO) gained 1.96% and 0.90%, respectively. However, BHP Group Ltd (BHP) ended the session flat.

Bank stocks ended the week on a high note. Westpac Banking Corp. (WBC) and National Australia Bank Ltd. (NAB) rose by 1.53% and 1.26%, respectively. ANZ Group Holdings Ltd (ANZ) and Commonwealth Bank of Australia (CBA) gained 0.08% and 0.71%, respectively.

Hang Seng Index

The Hang Seng Index declined by 0.54% on Friday. Tech and real estate stocks dragged the Index into negative territory. The Hang Seng Tech Index (HSTECH) slid by 1.45%. The Hang Seng Mainland Properties Index (HSMPI) declined by 0.78%.

Alibaba (9988) and Tencent (0700) fell by 1.65% and 2.45%, respectively.

Bank stocks had a mixed session. HSBC (0005) declined by 0.09%. China Construction Bank (0939) and Industrial Commercial Bank (1398) rose by 0.69% and 0.28%, respectively.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei rallied 1.40% on Friday.

Bank stocks had another mixed session. Sumitomo Mitsui Financial Group Inc. (8316) rose by 0.83%, while Mitsubishi UFJ Financial Group Inc. (8306) ended the day down 0.38%.

It was also another mixed session for the main components of the Nikkei. Tokyo Electron Ltd. (8035) rallied 6.03%. Sony Group Corp. (6758) and Softbank Group Corp. (9948) ended the day up 2.00% and 1.34%. Fast Retailing Co. Ltd. (9983) rose by 0.13%, while KDDI Corp. (9433) declined by 0.34%.

For upcoming economic events, check out our economic calendar.