Hang Seng Index, ASX200, Nikkei 225: China PMIs Deliver HSI Support

Key Insights:

• It was a mixed start to the Friday session, with the ASX 200 and Hang Seng Index finding support while the Nikkei saw red.
• Overnight US economic indicators fueled bets on consecutive Fed interest rate hikes in July and September to test buyer appetite.
• However, economic indicators from Japan and China also moved the dial this morning.

Market Overview

It was a mixed morning session for the Asian markets. The Hang Seng Index and the ASX 200 found support, while the Nikkei struggled.

Overnight US economic indicators from Thursday tested buyer appetite, with better-than-expected Q1 GDP and jobless claims fueling bets on Fed interest rate hikes in July and September.

After Fed Chair Powell’s hawkish comments and the US economic indicators from Thursday, the markets cemented a July rate hike ahead of today’s inflation numbers. Investors also raised their bets on a September move.

According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike stood at 89.3% versus 81.8% on Wednesday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 26.8%, up from 16.4% on Wednesday.

After the Fed-friendly numbers, investors were also mindful of today’s US economic indicators. The US Core PCE Price Index and personal spending numbers will likely further influence Fed policy bets.

However, economic indicators from China provided early support, with the ASX 200 and Hang Seng Index recovering from earlier losses.

In June, the China NBS Manufacturing PMI increased from 48.8 to 49.0, while the Non-Manufacturing PMI fell from 54.5 to 53.2. Economists forecast the manufacturing PMI to rise from 48.8 to 49.0 and the services PMI to fall from 54.5 to 53.7.

The latest Manufacturing PMI allayed the immediate fear of a deeper contraction ahead of the all-important Caixin Manufacturing PMI.

ASX 200

The ASX 200 was up 0.08% this morning, with economic indicators from China and Australia providing direction. While the China PMIs were the focal point, Australian private sector credit increased by 0.4% in May versus 0.6% in April. Economists forecast a 0.4% rise.

The big-4 had a bearish morning. The National Australia Bank (NAB) and Westpac Banking Corp (WBC) were down 0.27% and 0.33%, respectively. ANZ Group (ANZ) and The Commonwealth Bank of Australia (CBA) saw modest losses of 0.08% and 0.05%, respectively.

However, mining stock had a bullish morning. Rio Tinto (RIO) and BHP Group Ltd (BHP) saw gains of 0.27% and 0.56%, respectively, with Fortescue Metals Group (FMG) up 0.43%. Newcrest Mining (NCM) found support, rising by 1.06%.

Oil stocks also had a bullish morning. Woodside Energy Group (WDS) and Santos Ltd (STO) were up 0.76% and 1.27%, respectively. Brent Crude was up 0.15% to $74.45 this morning.

Hang Seng Index

The Hang Seng was up 0.27% this morning, with the PMI numbers from China providing support.

Considering the main Index components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) were down 0.90% and 0.79%, respectively.

However, bank stocks had a bullish morning. HSBC Holdings PLC was up 0.41%, with The Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) gaining 0.48% and 0.59%, respectively. Results from the Fed stress test supported the morning gains.

CNOOC (HK: 0883) rose by 0.54%.

Nikkei 225

The Nikkei 225 was down 0.44% this morning, with sticky inflation numbers testing buyer appetite. Tokyo’s annual core inflation rate held steady at 3.2% in June versus a forecasted 3.3%. While the jury is out on when the Bank of Japan will tweak its monetary policy stance, sticky inflation will likely give the hawks more voice.

Industrial production numbers were also bearish, falling by 1.6% in May versus a forecasted 1.0% decline. Industrial production rose by 0.7% in April.

From the banking sector, Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group fell by 0.37% and 0.56%, respectively.

Looking at the main components, Sony Corp (6758) and KDDI Corp (9433) led the way down, falling by 1.23% and 1.42%, respectively. Tokyo Electron Limited (8035) also struggled, declining by 0.96%.

However, SoftBank Group Corp. (9984) and Fast Retailing Co (9983) bucked the trend, rising by 0.31% and 0.75%, respectively.

Check out our economic calendar for economic events.