Hang Seng Index, ASX200, Nikkei 225: China and the Fed in Focus

Key Insights:

• It is a likely bullish start to the Friday session after the overnight gains in the US.
• This morning, there are no economic indicators from the region to influence, leaving investors to respond to the overnight US economic indicators and Fed sentiment.
• While hopes of a Beijing stimulus package remain a tailwind Beijing needs to deliver to extend the bullish near-term trend for the HSI and ASX 200.

Market Overview

The Asian markets are set for a bullish opening this morning.

This morning, there are no economic indicators from Australia, China, or Japan to influence. The lack of stats will leave the Asian markets to respond to the overnight jobless claims and US Producer Price Index numbers for June. Softer-than-expected inflation numbers fueled further bets of the Fed ending its monetary policy tightening cycle after the summer.

The US producer price index increased by 0.1% in June, year-over-year, versus 0.9% in May. Economists forecast the producer price index to rise by 0.4%. The more modest increase in the PPI signals easing inflationary pressures, supporting the market bets on the Fed hitting the brakes after the summer.

US jobless claims were also market-friendly, with initial jobless claims falling from 249k to 237k.

The impact of the numbers on sentiment toward Fed monetary policy was telling.

According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike was 92.4% versus 94.2% on Wednesday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 11.1%, down from 13.2% on Wednesday.

The NASDAQ Composite Index responded to the PPI Report, gaining 1.58%, with the Dow and the S&P 500 rising by 0.14% and 0.85%, respectively.

From the Asian region, China’s economy was in the spotlight on Thursday. However, disappointing trade data failed to spook investors, despite a more marked decline in imports and exports.

The China USD trade surplus widened from $65.81 billion to $70.62 billion in June. However, the trade surplus widened because of a slide in imports. Exports fell by 6.8%, year-over-year, versus 4.5% in May, while imports tumbled by 12.4% versus 7.5% in May. Economists forecast exports to fall by 4% and imports by 9.5%.

ASX 200

On Thursday, the ASX 200 gained 1.56% on softer US inflation numbers and China stimulus bets.

The big-4 had a bullish Thursday. ANZ Group (ANZ) and The Commonwealth Bank of Australia (CBA) ended the day with gains of 1.42% and 1.48%, respectively. The National Australia Bank (NAB) and Westpac Banking Corp (WBC) rose by 0.49% and 1.18%, respectively.

Mining stocks had another bullish session. Rio Tinto (RIO) and BHP Group Ltd (BHP) ended the day with gains of 3.03% and 1.50%, respectively, with Fortescue Metals Group (FMG) rising by 1.31%. Newcrest Mining (NCM) also found support, rallying by 3.72%.

Oil stocks had a bullish session. Woodside Energy Group (WDS) and Santos Ltd (STO) ended the day up 1.30% and 1.32%, respectively.

Hang Seng Index

The Hang Seng extended the winning streak to four sessions, rising by 2.60%.

Considering the main Index components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) rallied by 2.88% and 3.23%, respectively.

However, bank stocks had a mixed session. HSBC Holdings PLC and The Industrial and Commercial Bank of China (HK:1398) rose by 1.22% and 0.56%, respectively, while China Construction Bank (HK: 0939) ended the day flat.

CNOOC (HK: 0883) ended the day up 1.16%.

Nikkei 225

(For demonstrative purposes only)

The Nikkei 225 gained 149%, with investors brushing aside a USD/JPY at sub-139.

The banks had a mixed session. Sumitomo Mitsui Financial Group (8316) gained 1.01%, while Mitsubishi UFJ Financial Group fell by 0.70%.

Looking at the main components, Sony Corp (6758) rallied by 4.50%, with Tokyo Electron Limited (8035) and SoftBank Group Corp. (9984) seeing gains of 2.03% and 2.94%, respectively. Fast Retailing Co (9983) also found support, gaining 1.69%, while KDDI Corp (9433) bucked the trend, falling by 0.09%.

Check out our economic calendar for economic events.