Hang Seng Index, ASX200, Nikkei 225: Fed Fear Resurfaces

Key Insights:

• It was a mixed morning, with the Nikkei and the Hang Seng Index seeing red while the ASX 200 was flat.
• US trade data and a Bank of Canada rate hike resonated this morning.
• GDP numbers out of Japan and Australian trade data failed to move the dial.

Market Overview

It was a mixed Thursday morning session for the Asian markets. The Nikkei and Hang Seng Index tracked the NASDAQ Composite Index into negative territory, while ASX 200 was flat.

US trade data drew more interest than usual on Wednesday. The US trade deficit widened from $60.60 billion to $74.60 billion in April versus a forecasted $75.20 billion deficit. While imports increased, exports declined in April, leading the US trade deficit to a six-month high.

There was no reaction from the Fed, with the FOMC in the pre-FOMC meeting blackout period.

However, the impact of the stronger dollar on trade fueled bets on a June Fed interest rate hike. A surprise Bank of Canada rate hike created more Fed policy uncertainty.

According to the CME FedWatch Tool, the probability of a 25-basis point June interest rate hike increased from 21.8% to 33.8% versus 26.4% one week earlier.

On Wednesday, the NASDAQ Composite Index and S&P 500 saw losses of 1.29% and 0.38%, respectively. However, the Dow bucked the trend, rising by 0.27%.

This morning, economic data from Australia and Japan failed to move the dial, with China economic growth concerns also lingering.

ASX 200

The ASX 200 was up by 0.03%, with mining and bank stocks providing support.

Disappointing trade data failed to spook investors, with the latest numbers giving the RBA reason to hit pause for the second time. In April, the Australian trade surplus narrowed from A$14.822 billion to A$11.158 billion versus a forecast of A$14.000 billion. Exports fell by 5.0%, reflecting weak overseas demand, while imports increased by 2.0%.

The big-4 had a bullish morning. ANZ Group (ANZ) and The National Australia Bank (NAB) saw modest gains of 0.04% and 0.08%, respectively. However, Westpac Banking Corp (WBC) and The Commonwealth Bank of Australia (CBA) rose by 0.60% and 0.23%, respectively.

Oil stocks had a bullish morning. Woodside Energy Group (WDS) and Santos Ltd (STO) rose by 2.18% and 1.76%, respectively. Brent Crude was down 0.23% to $76.77 this morning.

Mining stock also made solid gains. Rio Tinto (RIO) and BHP Group Ltd (BHP) were up 1.83% and 1.38%, respectively, with Fortescue Metals Group (FMG) rising by 1.49%. However, Newcrest Mining (NCM) was down 0.98%.

Hang Seng Index

The Hang Seng was down 0.63% this morning.

Considering the main components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) saw losses of 1.37% and 1.78%, respectively.

However, bank stocks had a mixed morning session. HSBC Holdings PLC and the Industrial and Commercial Bank of China (HK:1398) were up 0.42% and 0.93%, respectively. China Construction Bank (HK: 0939) was flat.

CNOOC (HK: 0883) rose by 1.83%.

Nikkei 225

The Nikkei 225 was down 0.70% this morning, with better-than-expected GDP numbers for Q1 providing little comfort.

Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group rose by 0.79% and 0.61%, respectively.

Looking at the main components, Tokyo Electron Limited (8035) was up 0.48%, with Fast Retailing Co (9983) and KDDI Corp (9433) seeing gains of 0.09% and 0.11%, respectively. However, Sony Corp (6758) and SoftBank Group Corp. (9984) saw losses of 0.99% and 0.42%, respectively.

Check out our economic calendar for economic events.