Hang Seng Index, ASX 200, Nikkei Index: US Services PMI, NPC Dynamics at Play

Overview of the Tuesday Session

On Tuesday, the Hang Seng Index led the ASX 200 and Nikkei into negative territory. Despite the losses, the Nikkei retook the 40,000 handle to limit the downside.

Overnight losses across the US equity markets from Monday set the tone for the Tuesday Asian session.

On Monday, the Dow and S&P 500 declined by 0.25% and 0.12%, respectively. The Nasdaq Composite Index ended the session down 0.41%. US 10-year Treasury yields gained 0.79%, pressuring the US equity markets. Investors turned their attention to Fed Chair Powell testimony (Wed/Thurs) and the US Jobs Report (Fri).

The Asian economic calendar also influenced the Tuesday session. Service sector PMI and inflation numbers from Japan supported bets on an April Bank of Japan pivot from negative rates. Significantly, the core annual inflation rate for Tokyo accelerated from 1.8% to 2.5% in February.

Service sector PMI numbers from China disappointed as the National People’s Congress got underway. The Services PMI unexpectedly fell from 52.7 to 52.5.

Updates from the National People’s Congress (NPC) also impacted the appetite for riskier assets. Lawmakers failed to deliver a meaningful stimulus package to support the real estate sector and kick-start the Chinese economy. Investors had expected a stimulus package.

US Services PMIs, Australian GDP, and the National People’s Congress

Overnight US service sector PMI numbers from Tuesday will influence market risk sentiment on Wednesday. The ISM Services PMI fell from 53.4 to 52.6 in February. Significantly the Services Prices declined from 64.0 to 58.6, with the Services Employment Index down from 50.5 to 48.0. Concerns about the US economy likely impacted market risk sentiment.

Investors reacted to the numbers for February. On Tuesday, the Nasdaq Composite Index slid by 1.65%. The Dow and S&P 500 ended the session down 1.04% and 1.02%, respectively.

Nonetheless, investors must also consider the Asian economic calendar. On Tuesday, Q4 GDP and retail sales figures from Australia will draw investor interest. Better-than-expected numbers could temper bets on an RBA rate cut and impact rate-sensitive stocks. Economists forecast the Australian economy to expand by 0.3% quarter-on-quarter after growing by 0.2% in Q3.

While the numbers need consideration, the National People’s Congress will remain the focal point. Discussions about monetary and fiscal policy would influence the appetite for riskier assets. However, corporate earnings will also need consideration for the Hang Seng Index. JD.com (9618) will release earnings results on Wednesday.

On Wednesday, the ASX 200 and Nikkei futures were down by 10 and 360 points, respectively. Jitters about Fed Chair Powell testimony may also influence the markets.

ASX 200

The ASX 200 fell by 0.15% on Tuesday. Bank, oil, and tech stocks dragged the ASX 200 into negative territory. The S&P ASX All Technology Index (XTX) declined by 0.34%.

For the big four banks, the Commonwealth Bank of Australia (CBA) and National Australia Bank Ltd. (NAB) slid by 1.00% and 1.11%, respectively. ANZ Group Holdings Ltd (ANZ) and Westpac Banking Corp. (WBC) ended the day down 0.28% and 0.07%, respectively.

Oil stocks, Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) fell by 0.82% and 0.55%, respectively.

However, gold and mining stocks limited the downside for the ASX 200. Gold (XAU/USD) stocks led the way for the second session. Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. rallied 2.99% and 3.56%, respectively.

Mining stocks partially recovered losses from the Monday session. Fortescue Metals Group Ltd. (FMG) rose by 1.89%. BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) saw gains of 0.90% and 1.10%, respectively.

Hang Seng Index

On Tuesday, the Hang Seng Index slid by 2.61%. Real estate and tech stocks contributed to the losses. The Hang Seng Mainland Properties Index (HSMPI) and Hang Seng Tech Index (HSTECH) fell by 2.43% and 4.34%, respectively.

Alibaba (9988) and Tencent (0700) tumbled 3.33% and 2.90%, respectively.

Additionally, bank stocks had another negative session. HSBC (0005) fell by 0.99%. China Construction Bank (0939) and Industrial Commercial Bank (1398) declined by 1.03% and 0.75%, respectively.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei slipped by 0.03% on Tuesday. Significantly, the Nikkei fell below the 40,000 handle before ending the day at 40,098.

Bank stocks had a positive session. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) saw gains of 1.91% and 1.75%, respectively.

Moreover, the main components of the Nikkei had another mixed session.

Softbank Group Corp. (9948) gained 0.83%. Tokyo Electron Ltd. (8035) and Fast Retailing Co. Ltd. ended the day up 0.41% and 0.25%, respectively.

However, Sony Group Corporation (6758) and KDDI Corp. (9433) declined by 0.58% and 0.53%, respectively.

For upcoming economic events, refer to our economic calendar.