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

Key Insights:

• It was a bullish start to the week for the Asian equity markets, with the Hang Seng Index and the Nikkei leading the ASX 200.
• Investors responded to US inflation numbers from Friday and stimulus from Beijing.
• It is a busy Tuesday session, with manufacturing PMI numbers from China and the RBA interest rate decision in focus.

It was a bullish Monday for the Hang Seng Index and the broader Asian markets. The Hang Seng Index and the Nikkei led the ASX 200.

US economic indicators from Friday kickstarted the week, with rising bets on the Fed ending its monetary policy tightening cycle and soft-landing driving demand for riskier assets. The US Core PCE Price Index increased by 4.1% year-over-year in June versus 4.6% in May. Economists forecast an increase of 4.2%.

Economic data from the Asian region sent mixed signals, though stimulus news from China limited the impact of weaker private sector activity in China. The NBS Manufacturing PMI rose from 49.0 to 49.3, while the Non-Manufacturing PMI fell from 53.2 to 51.5. Economists forecast PMIs of 49.2 and 51.5, respectively.

The Tuesday Session

Today, the all-important Caixin Manufacturing PMI from China will move the dial. However, weak numbers could have less impact than usual. Hopes of more stimulus will likely to limit the damage. Economists forecast the Caixin Manufacturing PMI to fall from 50.5 to 50.3.

The RBA will be in action later in the session. Economists forecast a 25-basis point interest rate hike, which would put the RBA Rate Statement in focus. A dovish rate hike should deliver ASX 200 support.

From overnight, Chicago PMI numbers for July will unlikely influence investor sentiment. The Chicago PMI increased from 41.5 to 42.8 versus a forecasted increase to 43.0.

With a big week ahead on the earnings calendar, the NASDAQ Composite Index rose by 0.21%. On Monday, the Dow and the S&P 500 saw gains of 0.28% and 0.15%, respectively.

ASX 200

The ASX 200 rose by 0.09% on Monday to end the month up 2.88%. While mining stocks delivered support, bank stocks had a mixed session ahead of the RBA interest rate decision.

The Commonwealth Bank of Australia (CBA) and Westpac Banking Corp (WBC) saw gains of 0.20% and 0.27%, respectively. The National Australia Bank (NAB) rose by 0.14%, while ANZ Group (ANZ) slipped by 0.04%.

Mining stocks had a bullish session, with Rio Tinto and BHP Group Ltd (BHP) gaining 0.39% and 0.46%, respectively. Fortescue Metals Group and Newcrest Mining (NCM) ended the day flat.

Oil stocks had a mixed session. Woodside Energy Group (WDS) fell by 0.08%, while Santos Ltd (STO) gained 0.25%.

Hang Seng Index

The Hang Seng Index rallied 0.82% to end July up 6.15%. Softer US inflation numbers and China stimulus news provided Monday support.

Considering the main Index components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) saw gains of 1.14% and 1.67%, respectively.

Bank stocks also had a bullish session. HSBC Holdings PLC gained 0.62%. The Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) ended the day up 1.60% and 1.12%, respectively.

CNOOC (HK: 0883) rose by 1.29%.

Nikkei 225

(For reference purposes only)

The Nikkei 225 rallied by 1.26% on Monday, with a stronger UDS/JPY providing support. Despite the bullish session, the Nikkei ended July down 1.72%. Economic indicators were upbeat. Industrial production increased by 2.0% in June versus a 2.2% decline in May. Retail sales were up 5.9% year-over-year in June compared with 5.8% in May.

The banks had a bullish session. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group rallied by 0.98% and 0.88%, respectively. Upbeat earnings results provided support.

Looking at the main components, Sony Corp (6758) and SoftBank Group Corp. (9984) rose by 2.11% and 2.03%, respectively. Fast Retailing Co (9983) and Tokyo Electron Limited (8035) ended the day up 1.98% and 1.60%, respectively. However, KDDI Corp (9433) bucked the trend, falling by 1.97%.

Check out our economic calendar for economic events.