Hang Seng Index, ASX 200, Nikkei 225: US Labor Market Stats to Offer Early Support

Highlights

• The Asian equity markets ended the Tuesday session in negative territory, with the Hang Seng Index seeing heavy losses.
• Uncertainty toward Fed monetary policy goals resurfaced, testing the buyer appetite for riskier assets.
• Overnight US economic indicators from Tuesday and Australian GDP numbers will influence the Wednesday session.

Overview of the Tuesday Session

On Tuesday, the Asian equity markets tracked the US equity markets into negative territory. The Hang Seng Index, the Nikkei, and the ASX200 saw sizeable losses.

A slump in US factory orders failed to comfort the equity markets. Investor uncertainty about Fed policy goals led to a pickup in Treasury yields, weighing on the US equity markets.

On Monday, the Nasdaq Composite Index declined by 0.84%, with the Dow and the S&P 500 seeing losses of 0.11% and 0.54%, respectively. 10-year US Treasury yields increased by 1.33%, ending the session at 4.253%.

On Tuesday, Service sector PMI numbers from China failed to calm investor sentiment despite a pickup in activity. PMI numbers from Australia and Japan revealed deteriorating service sector activity.

US Services PMIs and JOLTs Job Openings to Set the Tone

Overnight US economic indicators from Tuesday will influence the Wednesday Asian equity session. Mixed stats left the US equity markets in limbo ahead of the US Jobs Report on Friday. A larger-than-expected fall in US JOLTS Job Openings countered a pickup in US service sector activity.

The softer-than-expected labor market numbers supported a pullback in Treasury yields. 10-year US Treasury yields declined by 2.11% to 4.167%. The Nasdaq Composite Index benefited from the pullback, rising by 0.31%. However, the Dow and S&P 500 fell by 0.22% and 0.06%, respectively.

Despite the mixed US equity market session, weaker US labor market conditions but upbeat US service sector activity could ease fears of a hard landing. The Fed may respond more to the labor market stats than service sector activity.

However, the Asian economic calendar also warrants consideration. Australian GDP numbers for Q3 will draw investor interest. Hotter-than-expected numbers could influence sentiment toward RBA policy goals. Bets on a more hawkish RBA rate path could impact the appetite for ASX 200-listed stocks. Economists forecast the Australian economy to expand by 1.8% year-over-year vs. growth of 2.1% in the second quarter.

In the Asian futures, the ASX 200 and the Nikkei were up 19 and 130 points, respectively, on Wednesday.

ASX 200

The ASX 200 declined by 0.89% on Tuesday. The S&P ASX All Technology Index (XTX) fell by 0.83%, with Gold (XAU/USD) and mining stocks contributing to the losses.

Evolution Mining Ltd. (EVN) ended the day flat, while Northern Star Resources Ltd. (NST) slid by 4.03%.

Mining stocks had a negative session. BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) declined by 1.32% and 1.04%. Fortescue Metals Group Ltd. (FMG) ended the day down 0.87%.

Energy stocks also ended the day in negative territory. Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) fell by 2.70% and 0.88%.

Bank stocks had a mixed session. Commonwealth Bank of Australia (CBA) and ANZ Group Holdings Ltd (ANZ) fell by 0.39% and 0.25%. National Australia Bank Ltd. (NAB) and Westpac Banking Corp. (WBC) rose by 0.42% and 0.14%, respectively.

Hang Seng Index

The Hang Seng Index slid by 1.91% on Tuesday. Uncertainty toward Fed policy intentions and the Chinese economy impacted market risk sentiment.

Alibaba (9988) and Tencent (0700) fell by 0.42% and 2.53%.

Bank stocks also ended the session in negative territory. HSBC (0005) declined by 0.84%. China Construction Bank (0939) and Industrial and Commercial Bank (1398) ended the session down 1.12% and 1.63%, respectively.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei 225 ended the Tuesday session down 1.37%.

Bank stocks saw further losses. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) declined by 0.72% and 0.60%. However, it was another mixed session for the main components of the Nikkei.

Tokyo Electron Ltd. (8035) tumbled by 3.96%. Fast Retailing Co. Ltd. (9983) and Softbank Group Corp. (9948) ended the session down 2.40% and 1.67%, respectively. KDDI Corp. (9433) slipped by 0.02%, while Sony Group Corp. (6758) gained 0.64%.

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