Hang Seng Index, ASX200, Nikkei 225: Nikkei in Breakout mode

Key Insights:

• It was a mixed morning, with Hang Seng Index seeing red while the Nikkei and the ASX 200 found further support.
• Growth concerns weighed on the Hang Seng Index, while progress toward a US debt ceiling deal delivered ASX 200 and Nikkei support.
• However, hotter-than-expected inflation numbers from Japan failed to spook investors.

Market Overview

It was a mixed Friday morning session for the Asian markets. The Nikkei and the ASX 200 made further gains while the Hang Seng Index struggled.

US economic indicators and progress toward a US debt ceiling deal supported the US equity markets on Thursday.

The Philly Fed Manufacturing Index rose from -31.3 to -10.4 in May versus a forecasted -19.8. Significantly, new orders fell at a less marked pace, while the prices paid sub-component signaled renewed wholesale inflationary pressures. However, labor market conditions remain robust, with initial jobless claims falling from 264k to 242k in the week ending May 12.

Fed chatter tested investor appetite, with FOMC member Lorie Logan suggesting the latest economic indicators do not support a pause on interest rate hikes. The better-than-expected economic indicators and hawkish Fed chatter fueled bets on a more hawkish Fed.

According to the CME FedWatchTool, the probability of a 25-basis point June interest rate hike stood at 36.2%, up from 10.7% on May 11. The chances of a 25-basis point interest rate cut stood at 0.0%, unchanged from one week earlier.

On Thursday, the NASDAQ Composite Index rose by 1.51%, with the S&P 500 and the Dow seeing gains of 0.94% and 0.34%, respectively.

This morning, economic indicators from Japan failed to spook investors, despite core inflation accelerating in April. The core annual inflation rate picked up from 3.1% to 3.4%, with the annual rate up from 3.2% to 3.5%, raising the prospects of a Bank of Japan shift from ultra-loose.

ASX 200

The ASX 200 was up by 0.52%, with the latest employment numbers easing fears of another RBA surprise interest rate hike.

The big-4 had a bullish morning. The Commonwealth Bank of Australia (CBA) and the National Australia Bank (NAB) saw gains of 1.43% and 1.65%, respectively. Westpac Banking Corp (WBC) and ANZ Group (ANZ) were up 1.26% and 1.27%, respectively.

However, mining stocks were a drag, with China growth concerns weighing. Rio Tinto (RIO) and BHP Group Ltd (BHP) were down 0.39% and 0.14%, respectively, with Fortescue Metals Group (FMG) falling by 0.49 %. Newcrest Mining (NCM) was down 1.89%.

Oil stocks had a mixed morning. Woodside Energy Group (WDS) gained 0.50%, while Santos Ltd (STO) fell by 0.14%. Brent Crude was up 0.83% to $76.49 this morning.

Hang Seng Index

The Hang Seng was up 1.05% this morning, with China growth concerns weighing.

Considering the main components, Tencent Holdings Ltd (HK:0700) fell by 1.96%, with Alibaba Group Holding Ltd (HK:9988) tumbling by 5.24%.

Bank stocks had a mixed morning session. HSBC Holdings PLC and China Construction Bank (HK: 0939) saw losses of 0.08% and 0.74%, respectively. Industrial and Commercial Bank of China (HK:1398) was flat.

CNOOC (HK: 0883) was down 1.09%.

Nikkei 225

The Nikkei 225 rose by 1.00% this morning. Hotter-than-expected inflation numbers fueled bets on a shift in the Bank of Japan’s forward guidance but failed to spook investors. The bullish session saw the Nikkei reach the highest level since 1990. A stronger USD/JPY, progress toward a US debt ceiling deal, and corporate earnings delivered support.

Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group saw losses of 1.26% and 1.06%, respectively.

Considering the main components, Fast Retailing Co (9983) led the way, rising by 2.16%, with Tokyo Electron Limited (8035) up by 1.25%.

SoftBank Group Corp. (9984) and KDDI Corp (9433) saw gains of 0.75% and 0.22%, respectively, while Sony Corp (6758) fell by 0.91%.

Check out our economic calendar for economic events.