Hang Seng Index, ASX200, Nikkei 225: Powell Leaves the Door Ajar

Key Insights:

• It was a mixed Wednesday session for the Asian equity markets, with the ASX 200 bucking a bearish session.
• Fed Fear left the Hang Seng Index and the Nikkei in the red, while Q2 Australian inflation numbers spurred an ASX 200 breakout.
• However, it will be a testy Thursday session, with the markets set to respond to the overnight Fed interest rate decision and the Fed press conference.

It was a mixed Wednesday for the Hang Seng Index and the broader Asian markets. The Hang Seng Index and the Nikkei saw red as investors hit the sidelines ahead of the Fed interest rate decision and the press conference. However, softer Q2 inflation numbers from Australia fueled an ASX 200 breakout session as investors eased bets on an RBA rate hike.

Overnight US economic indicators from Tuesday failed to spur a broad-based market rally despite a sharp rise in US consumer confidence. The CB Consumer Confidence Index increased from 110.1 to 117.0 in July, supporting a pickup in consumption and service sector activity. Upbeat US corporate earnings also failed to distract investors from the looming Fed interest rate decision and forward guidance.

Alphabet Inc. (GOOGL) and Microsoft (MSFT) beat estimates after the closing bell on Tuesday.

The Thursday Session

For today’s session, there are no economic indicators for investors to digest. The lack of stats will leave the markets to respond to the overnight Fed interest rate hike and the Fed Chair Powell press conference. The Fed raised the Fed Funds Rate by 25 basis points on Wednesday, leaving Fed Chair Powell to move the dial.

Fed Chair Powell disappointed investors looking for an end to the monetary policy tightening cycle, saying,

“It is certainly possible that we would raise the (Fed) funds rate again at the September meeting if the data warranted, and I would also say it’s possible that we would choose to hold steady at that meeting.”

For those looking for a timeline for rate cuts, Powell said,

“We’ll be comfortable cutting rates when we’re comfortable cutting rates, and that won’t be this year.”

While the monetary policy outlook was bearish, Powell highlighted that central bank staff are no longer forecasting a recession, supporting the bets on a soft landing and cushioning the downside for the US markets.

The US equity markets responded to the Fed, with the NASDAQ Composite Index and S&P 500 falling 0.12% and 0.02%, respectively. However, it was also a bullish session for the Dow, which gained 0.23%.

ASX 200

The ASX 200 gained 0.85% on Wednesday, with Q2 inflation numbers from Australia shutting the door on an RBA rate hike. Australia’s annual inflation rate softened from 7.0% to 6.0% in Q2, delivering a breakout session for bank stocks. Mining stocks continued to benefit from Politburo pledges to support the ailing Chinese economy.

The big-4 had a bullish Wednesday session. ANZ Group (ANZ) and Westpac Banking Corp (WBC) ended the day with gains of 1.60% and 1.66%, respectively. The National Australia Bank (NAB) and The Commonwealth Bank of Australia (CBA) also found support, rising by 1.56% and 0.77%, respectively.

Mining stocks had another breakout session. Rio Tinto (RIO) and BHP Group Ltd (BHP) rallied by 1.37% and 2.31%, respectively, with Fortescue Metals Group (FMG) up 2.28%. Newcrest Mining (NCM) rose by a more modest 0.94%.

Rio Tinto could come under pressure today after missing earnings forecasts on Wednesday.

Oil stocks had a bullish session. Woodside Energy Group (WDS) and Santos Ltd (STO) rose by 0.34% and 0.25%, respectively.

Hang Seng Index

The Hang Seng Index fell by 0.36% on investor caution, partially reversing a 4.10% breakout from Tuesday.

Considering the main Index components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) saw losses of 1.16% and 1.37%, respectively.

Bank stocks had a mixed session. HSBC Holdings PLC gained 0.23%. The Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) ended the day down by 1.08% and 0.90%, respectively.

CNOOC (HK: 0883) slipped by 0.16%.

Nikkei 225

(For reference purposes only)

The Nikkei 225 declined by a modest 0.04%, with a weaker USD/JPY adding to the bearish mood.

The banks had a bearish session. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group saw losses of 0.33% and 0.23%, respectively.

However, looking at the main components, Tokyo Electron Limited (8035) and SoftBank Group Corp. (9984) rose by 0.99% and 0.90%, respectively. Fast Retailing Co (9983) and KDDI Corp (9433) saw gains of 0.15% and 0.16%, respectively. Sony Corp (6758) ended the day with a modest 0.04% gain.

Check out our economic calendar for economic events.