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

Key Insights:

• It was a mixed morning, with the Hang Seng Index seeing red while the Nikkei found support.
• There were no US economic indicators from Friday to influence, leaving the Asian markets in limbo.
• Market angst ahead of the US CPI Report on Tuesday and the Fed interest rate decision on Wednesday tested buyer appetite.

Market Overview

It was a mixed Monday morning session for the Asian markets. The Nikkei found support while the Hang Seng Index struggled with Fed monetary policy uncertainty.

Investor uncertainty toward the Fed interest rate decision and policy outlook tested buyer appetite this morning. While the markets are betting on a Fed pause this Wednesday, the chances of a July interest rate hike have increased in recent sessions.

The US CPI Report on Tuesday should decide the outcome of this week’s FOMC meeting. A marked softening in US inflation would ease bets on a July move.

With three days remaining, the probability of a 25-basis point Fed interest rate hike stood at 29.9%, up from 25.3% one week earlier. However, the sentiment toward the July interest rate decision has turned more hawkish.

According to the CME FedWatch Tool, the chance of a 25-basis point July Fed rate hike stands at 52.8% versus 30.1% for a hold. Significantly, bets on a 50-basis point July interest rate hike rose from 14.4% to 17.1% over the last week.

On Friday, the NASDAQ Composite Index gained 0.16%, with the Dow and S&P 500 ending the day up 0.13% and 0.11%, respectively.

ASX 200

The Australian markets were closed today. On Friday, the ASX 200 gained 0.32%.

Hang Seng Index

The Hang Seng was down 0.44% this morning.

Considering the main components, Tencent Holdings Ltd (HK:0700) was flat, while Alibaba Group Holding Ltd (HK:9988) fell by 0.54%.

Bank stocks had a bearish morning session. HSBC Holdings PLC and China Construction Bank (HK: 0939) saw losses of 0.17% and 0.19%, respectively. The Industrial and Commercial Bank of China (HK:1398) declined by 0.46%.

CNOOC (HK: 0883) fell by 2.19%. This morning, Brent Crude Oil slid by 1.15% to $73.93.

Nikkei 225

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

Sumitomo Mitsui Financial Group (8316) gained 0.43%, while Mitsubishi UFJ Financial Group declined by 0.42%.

Looking at the main components, SoftBank Group Corp. (9984) rallied 1.76%, with Sony Corp (6758) and Tokyo Electron Limited (8035) up 0.95% and 0.90%, respectively.

KDDI Corp (9433) also found support, rising by 0.51%, while Fast Retailing Co (9983) bucked the trend, falling 0.62%.

Check out our economic calendar for economic events.