Hang Seng Index, ASX200, Nikkei 225: HSI Hit by China Woes and Fed Jitters

Key Insights:

• It was a mixed Wednesday morning, with the Hang Seng Index and the ASX 200 seeing red.
• Concerns over the Chinese economy and investor caution toward Fed Chair Powell testimony weighed on riskier assets.
• There were no economic indicators from the region to provide direction.

Market Overview

It was a mixed Wednesday morning session for the Asian markets. The Hang Seng Index and ASX 200 saw red, while the Nikkei made early gains.

There were no US economic indicators from overnight to influence market risk sentiment this morning. US housing sector numbers were upbeat but unlikely to force the Fed to rethink its monetary policy goals over the near term.

However, market angst over the Chinese economy and disappointment toward the PBoC Prime Loan Rate cuts resonated.

Investors were also cautious ahead of Fed Chair Powell’s first day of testimony on Capitol Hill. The FOMC projected the Fed Funds Rate to peak at 5.6% in 2023. Hawkish chatter and a resilient US economy could push the peak rate higher.

According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 74.4%, up from 59.9% one week earlier. The chances of the Fed lifting the Fed Funds Rate to 5.75% in September declined from 13.1% to 11.9% over one week.

ASX 200

The ASX 200 was down 0.29%, with mining stocks weighing on the broader index.

The big-4 had a mixed morning. The Commonwealth Bank of Australia (CBA) and The National Australia Bank (NAB) saw gains of 0.37% and 0.26%, respectively. However, ANZ Group (ANZ) and Westpac Banking Corp (WBC) were down 0.42% and 0.79%, respectively.

Mining stock had a bearish morning over China’s economic woes. Rio Tinto (RIO) and BHP Group Ltd (BHP) saw losses of 0.74% and 1.51%, respectively, with Fortescue Metals Group (FMG) down 1.36%. Newcrest Mining (NCM) fell by 0.79%.

Oil stocks also had a bearish morning. Woodside Energy Group (WDS) and Santos Ltd (STO) fell by 1.87% and 0.65%, respectively. Brent Crude was up 0.43% to $76.23 this morning.

Hang Seng Index

The Hang Seng was down 1.93%, with concerns over the Chinese economy and Fed Chair Powell jitters weighing.

Considering the main components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) saw losses of 3.31% and 3.68%, respectively.

Bank stocks also struggled. HSBC Holdings PLC fell by 0.81%, with The Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) seeing losses of 0.24% and 0.20%, respectively.

CNOOC (HK: 0883) fell by 0.89%.

Nikkei 225

The Nikkei 225 was up 0.40% this morning, with a stronger USD/JPY providing support.

From the banking sector, Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group rose by 0.79% and 0.70%, respectively.

Looking at the main components, SoftBank Group Corp. (9984) continued to make gains, rising by 2.63%.

Tokyo Electron Limited (8035) and Fast Retailing Co (9983) were up 0.68% and 0.62%, respectively. While KDDI Corp (9433) trailed the front runners with a modest 0.21% gain, Sony Corp (6758) bucked the bullish trend, sliding by 1.42%.

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