Hang Seng Index, ASX200, Nikkei 225: China Trade Data in Focus

Key Insights:

• It is a likely bullish start to the Thursday session.
• This morning, we expect the Asian markets to respond to the US CPI Report from overnight ahead of trade data from China.
• However, investors may take a more cautious approach to the session with the US Producer Price Index Report out later in the day.

Market Overview

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

This morning, the Asian markets will respond to the overnight US CPI Report. Softer-than-expected inflation numbers fueled bets of an end to the Fed monetary policy tightening cycle after the summer.

The US annual inflation rate softened from 4.0% to 3.0% versus a forecasted 3.1%. However, core inflation continued to deliver uncertainty, with the core inflation rate softening from 5.3% to 4.8%. Economists forecast a core annual inflation rate of 5.0%.

The impact 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 94.2% versus 93.0% on Tuesday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 13.2%, down from 22.3% on Tuesday.

The NASDAQ Composite Index responded to the CPI Report, gaining 1.15%, with the Dow and the S&P 500 rising by 0.25% and 0.74%, respectively.

From the Asian region, it was a relatively quiet Wednesday session, with machinery orders from Japan in focus. However, an extended slide in the USD/JPY left the Nikkei in the red, while the Hang Seng and ASX 200 made gains on China stimulus bets and hopes of softer US inflation numbers.

It could be another testy session for the Asian markets today. China trade data will draw interest this morning. While the hope of more stimulus from Beijing delivered support this week, another set of disappointing numbers will test buyer appetite.

ASX 200

On Wednesday, the ASX 200 gained 0.38%, with the China stimulus expectations and hopes of softer US inflation delivering support.

The big-4 had a mixed Wednesday. ANZ Group (ANZ) and The National Australia Bank (NAB) both saw gains of 0.92%, respectively, with Westpac Banking Corp (WBC) ending the day up 0.19%. However, The Commonwealth Bank of Australia (CBA) bucked the trend, falling by 0.47%.

Mining stocks had another bullish session. Rio Tinto (RIO) and BHP Group Ltd (BHP) ended the day with gains of 1.64% and 1.71%, respectively, with Fortescue Metals Group (FMG) gaining by 2.49%. Newcrest Mining (NCM) bucked the trend with a 0.19% loss.

Oil stocks also had a bullish session. Woodside Energy Group (WDS) and Santos Ltd (STO) saw gains of 2.65% and 1.20%, respectively.

Hang Seng Index

The Hang Seng extended the winning streak to three sessions, rising by 1.08%.

Considering the main Index components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) gained 1.86% and 1.24%, respectively.

However, bank stocks had a mixed session. HSBC Holdings PLC and China Construction Bank (HK: 0939) rose by 1.07 % and 0.69%, respectively, while The Industrial and Commercial Bank of China (HK:1398) ended the day flat.

CNOOC (HK: 0883) ended the day up 2.38%.

Nikkei 225

(For demonstrative purposes only)

The Nikkei 225 bucked the broader market trend, falling 0.81% on the USD/JPY slide to sub-141. Core machinery orders for May added to the bearish mood. In May, core machinery orders tumbled by 7.6% versus a forecasted 1.0% increase. Core machinery orders surged by 5.5% in April.

The banks had a bullish session. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group ended the day with gains of 2.25% and 1.66%, respectively.

Looking at the main components, Tokyo Electron Limited (8035) slid by 3.33%, with Sony Corp (6758) and KDDI Corp (9433) seeing losses of 1.78% and 0.02%, respectively. SoftBank Group Corp. (9984) and Fast Retailing Co (9983) bucked the trend, with gains of 2.13% and 0.66%, respectively.

Check out our economic calendar for economic events.