Hang Seng Index, ASX200, Nikkei 225: PBoC Sends the Hang Seng South

Key Insights:

• It was a mixed morning, with the Hang Seng Index and the Nikkei seeing red.
• The PBoC disappointed the markets, cutting Loan Prime Rates in line with forecasts, while the RBA meeting minutes fueled an ASX 200 rally.
• Investor apprehension ahead of Fed Chair Powell testimony later today added to the bearish sentiment.

Market Overview

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

There were no US economic indicators from Monday for the markets to consider. The lack of economic indicators left the PBoC and the RBA to influence the morning.

In line with expectations, the PBoC cut the 5-year LPR from 4.3% to 4.2% and the 1-year LPR from 3.65% to 3.55%. Investors hoped for larger-than-forecast cuts to Loan Prime Rates and a stimulus package from Beijing. The disappointment weighed on riskier assets.

However, the RBA meeting minutes raised hopes of ending the monetary policy tightening cycle, driving support for the ASX 200.

While the RBA and the PBoC influenced, market tension ahead of Fed Chair Powell testimony tested buyer appetite. The FED remains hawkish, with the markets betting on a 25-basis point July interest rate hike and possibly more.

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 up 0.93% this morning, with the big-4 banks and mining stocks delivering support.

The big-4 had a bullish morning. The Commonwealth Bank of Australia (CBA) and The National Australia Bank (NAB) saw gains of 1.41% and 1.46%, respectively. ANZ Group (ANZ) and Westpac Banking Corp (WBC) were up 1.04% and 1.37%, respectively.

Mining stock also had a bullish morning. Rio Tinto (RIO) and BHP Group Ltd (BHP) saw gains of 1.00% and 1.67%, respectively, with Fortescue Metals Group (FMG) up 0.72%. Newcrest Mining (NCM) rose by 0.22%.

Oil stocks had a bullish morning. Woodside Energy Group (WDS) and Santos Ltd (STO) were up 2.39% and 2.18%, respectively. Brent Crude was down 0.17% to $75.96 this morning.

Hang Seng Index

The Hang Seng was down 1.53%, with China stimulus moves weighing on riskier assets.

Considering the main components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) saw losses of 1.96% and 1.67%, respectively.

However, bank stocks had a mixed morning session. HSBC Holdings PLC and The Industrial and Commercial Bank of China (HK:1398) fell by 0.33% and 0.72%, respectively. China Construction Bank (HK: 0939) was flat.

CNOOC (HK: 0883) fell by 1.41%.

Nikkei 225

The Nikkei 225 was down 0.42% this morning, with a weaker USD/JPY also weighing.

From the banking sector, Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group fell by 1.70% and 1.20%, respectively.

Looking at the main components, SoftBank Group Corp. (9984) bucked the trend, rising by 1.49%.

However, KDDI Corp (9433) slid by 1.77%, with Sony Corp (6758) and Fast Retailing Co (9983) seeing losses of 0.37% and 0.35%, respectively. Tokyo Electron Limited (8035) fell by 0.25%.

Check out our economic calendar for economic events.