Hang Seng Index, ASX 200, Nikkei 225: US Labor Data Spurs Fed Rate Optimism

Highlights

• Hang Seng and ASX 200 ended the week positively on Softer US labor data.
• 10-year US Treasury yields drop, supporting riskier assets.
• On Monday, the focus will shift to earnings. Westpac and Macau hotels are on the calendar to release earnings results.

Overview of the Friday Session

On Friday, the Hang Seng Index and the ASX 200 enjoyed positive ends to the week. Investors reacted to softer-than-expected US labor market numbers from Thursday that closed the door on Fed rate hikes.

US equity market gains from Thursday had set the mood for the Friday Asian session. On Thursday, the S&P 500 rallied 1.89%. The Nasdaq Composite Index and Dow ended the day up 1.78% and 1.70%, respectively.

On Friday, 10-year US Treasury yields tumbled in response to sentiment toward Fed interest rate goals. The pullback in yields supported riskier assets. Economic indicators from China contributed to the positive session. A modest pickup in service sector activity eased fears of a slump in private sector activity.

A Softer US Labor Market and Fed Bets Remain Tailwinds

US economic indicators from Friday continued to fuel bets on the Fed ending its rate hike cycle. An unexpected rise in the US unemployment rate and softer wage growth influenced sentiment toward Fed policy goals. Slower service sector activity aligned with market bets on the Fed.

On Friday, the Nasdaq Composite Index rallied 1.38%, with the Dow and S&P 500 gaining 0.66% and 0.94%. The gains from the Friday session will likely set the tone as the Japanese markets reopen after the Friday holiday.

However, investors must consider the Asian economic calendar on Monday. Finalized service sector PMI numbers for Japan and Bank of Japan monetary policy meeting minutes will draw investor interest.

A downward revision to the Services PMI could affect the Nikkei. According to preliminary figures, the PMI fell from 53.8 to 51.1 in October.

The BoJ meeting minutes could spook investors if there is greater conviction to move away from negative interest rates.

The earnings will also be in focus. Westpac Banking (WBC) and Macau hotel-listed companies release earnings results.

In the futures markets on Monday, the ASX 200 and Nikkei were up 14 and 450 points, respectively.

ASX 200

The ASX 200 gained 1.14% on Friday. Falling Treasury yields continued to support tech stocks. The S&P/ASX 200 Information Technology Index (XIJ) gained 0.99%, with the S&P/ASX 200 All Technology Index (XTX) rising by 1.54%.

Bank stocks joined tech stocks in positive territory. The National Australia Bank Ltd. (NAB) rallied 1.72%. Westpac Banking Corp. (WBC) and the Commonwealth Bank of Australia (CBA) ended the day up 1.56% and 1.52%. ANZ Group Holdings Ltd. (ANZ) gained 0.91%.

Mining and oil stocks had a mixed session. BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) rose by 0.26% and 0.69%, respectively, while Fortescue Metals Group Ltd. (FMG) slipped by 0.09%.

Woodside Energy Group Ltd. (WDS) ended the day up 1.56%, while Santos Ltd. (STO) declined by 1.20%. News from Thursday of the Federal Court suspending work on the Barossa Gas Project pipeline until November 13 weighed.

Gold stocks also responded to the shift in sentiment toward the Fed and the effect on the US dollar and Treasury yields. Newmont Corp. (NEM) and Northern Star Resources Ltd. saw gains of 1.19% and 0.35%, respectively. Gold Spot ended Friday up 0.35% to $1,992.65.

Hang Seng Index

The Hang Seng Index rallied 2.52% on Friday, supported by the market bets on the Fed and interest rates.

Alibaba (9988) and Tencent (0700) rallied 2.92% and 4.85%, respectively.

Bank stocks also had a positive Friday session. HSBC (0005) and China Construction Bank (0939) saw gains of 2.11% and 1.34%. Industrial and Commercial Bank (1398) rose by 0.79%.

The Nikkei 225

(Graph for reference purposes only)

The Japanese markets were closed on Friday for Culture Day.

For upcoming economic events, check out our economic calendar.