Hang Seng Index, ASX200, Nikkei 225: Fed Fear Trumps China Stats

• It was a mixed Tuesday morning for the Asian markets, with the Hang Seng Index and ASX 200 seeing red.
• However, economic indicators from China provided relief, with the Chinese economy seeing strong growth in Q1.
• Fed Fear continued to weigh on investor sentiment, with investors also looking ahead to US corporate earnings results.

Market Overview

It was a mixed morning for the Asian markets. The Hang Seng Index and ASX 200 struggled, while a stronger USD/JPY delivered Nikkei support.

Better-than-expected economic indicators from China delivered riskier assets with support this morning.

In Q1, the Chinese economy expanded by 2.2% versus 0.6% growth in Q4 2022. The numbers were in line with forecasts. However, year-over-year, the economy expanded by 4.5% versus a forecasted 4.0%. In Q4 2022, the economy grew by 2.9% year-over-year.

Retail sales and industrial production figures also beat forecasts, signaling a positive end to the first quarter.

Retail sales increased by 10.6% in March year-over-year versus +3.5% in February. Economists forecast an increase of 7.4%. Industrial production advanced by 3.9% versus 2.4% in February. Economists forecast a rise of 4.0%.

However, the numbers failed to reverse losses for the ASX 200 and the Hang Seng Index. Central Bank angst weighed on investor sentiment.

This morning, the RBA meeting minutes raised the threat of further rate hikes, with sustained demand and sticky inflation likely to push interest rates higher.

Investor sentiment toward the Fed and the interest rate trajectory have also become more hawkish.

According to the FedWatchTool, there is a 91.0% probability of a 25-basis point Fed interest rate hike in 15 days. One month ago, there was a 20.7% chance of a 25-basis point May interest rate hike. Significantly, there are also increasing bets of a 25-basis point hike in June, up from 0% in March to 18.4% this morning.

Hopes of an H2 2023 interest rate cut are also subsiding. There is a 2.1% chance of a 25-basis point interest rate cut in July, down from 15.4% one month ago.

Despite the more hawkish policy bets, the NASDAQ Composite Index increased by 0.28% on Monday, with the S&P 500 and Dow seeing gains of 0.33% and 0.30%, respectively.

However, the NASDAQ mini was down 14 points, with the S&P 500 falling by 1.25. The Dow was flat. Corporate earnings and Fed chatter will be focal points. Big names on the US corporate earnings calendar include Johnson & Johnson (JNJ), Netflix (NFLX), Bank of America (BAC), and Goldman Sachs (GS).

ASX 200

The ASX 200 was down 0.26%, with economic indicators from China supporting mining stocks.

The big-4 had a mixed morning. ANZ Group (ANZ) and the Commonwealth Bank of Australia (CBA) fell by 0.12% and 0.50%, respectively. However, the National Australia Bank (NAB) and Westpac Banking Corp (WBC) saw gains of 0.10% and 0.04%, respectively.

Mining stocks had a bullish morning. Rio Tinto (RIO) and BHP Group Ltd (BHP) were up by 0.74% and 0.28%, respectively, with Fortescue Metals Group (FMG) rising by 0.13%. Newcrest Mining (NCM) fell by 0.27%.

However, oil stocks had a bearish morning. Woodside Energy Group (WDS) and Santos Ltd (STO) were down by 1.96% and 1.84%, respectively. Brent Crude was up 0.34% to $85.05 this morning.

Hang Seng Index

The Hang Seng was down 0.77% this morning. Economic indicators from China provided limited support as Fed Fear continued to pressure investor sentiment.

Considering the main components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) were down by 2.64% and 0.73%, respectively.

It was also a bearish morning for banking stocks. HSBC Holdings PLC fell by 1.58%, with the Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) seeing losses of 0.46% and 0.56%, respectively.

CNOOC (HK: 0883) was down 2.01%.

Nikkei 225

The Nikkei 225 was up 0.41% this morning, supported by a stronger USD/JPY.

Bank stocks found further support from Friday’s US bank earnings, with Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group seeing gains of 1.54% and 1.14%, respectively.

Looking at the main components, KDDI Corp (9433) gained 1.77%, with Fast Retailing Co (9983) up by 0.59%. Sony Corp (6758) and SoftBank Group Corp. (9984) also found support, rising by 0.49% and 0.46%, respectively. However, Tokyo Electron Limited (8035) bucked the trend, sliding by 2.23%.

Check out our economic calendar for today’s economic events.