Hang Seng Index, ASX200, Nikkei 225: RBA Sends the ASX Down

Key Insights:

• It was a mixed morning session for the Asian markets, with the Hang Seng Index finding much-needed support.
• Economic indicators and RBA monetary policy provided early direction, while a weaker USD/JPY limited the upside for the Nikkei 225.
• Despite the mixed morning, Fed Fear lingered ahead of Fed chatter in response to the US Jobs Report.

Market Overview

It was a mixed morning session. There were no US economic indicators from Monday to influence market sentiment. The Hang Seng and the Nikkei found support despite the renewed threat of US interest rates peaking above 5%.

However, with Fed Chair Powell speaking overnight, we could see caution resurface. The last Fed press conference preceded the jobs report, with softer inflation supporting a less hawkish policy outlook. Powell could shift gears today as the markets await the US CPI Report for January.

This morning, economic indicators from Asia delivered mixed results, while the RBA raised interest rates by 25 basis points.

ASX 200

The ASX 200 was down 0.50% this morning. Australian economic indicators had a muted impact on the ASX200 ahead of the RBA monetary policy decision.

In December, the Australian trade surplus narrowed from A$13.20 billion to A$12.237 billion. Exports fell by 1.0%, while imports increased by 1.0%. While the numbers were bearish, hopes of resuming trade ties with China following talks on Monday muted the impact.

However, the RBA sent the ASX200 into the red later in the morning. While lifting rates by 25 basis points to 3.35%, which was in line with expectations, the RBA warned of more rate hikes. The hawkish outlook was bearish for the ASX200.

This morning, bank stocks had a mixed morning. ANZ Group (ANZ) was up 0.22%, while Commonwealth Bank of Australia (CBA) was down 0.59%. National Australia Bank (NAB) and Westpac Banking Corp (WBC) saw losses of 0.35% and 0.46%, respectively.

Mining stocks also had a mixed session. BHP Group Ltd (BHP) and Rio Tinto (RIO) were down 0.33% and 0.83%, respectively, while Fortescue Metals Group (FMG) rose by 0.64%. Newcrest Mining (NCM) continued to find support on the news of US mining company Newmont Corp’s $17 billion bid, rising by 1.67%

Hang Seng Index

The Hang Seng found much-needed support this morning, rising by 0.90%.

Tencent Holdings Ltd (HK:0700) was up 1.75%, with Alibaba Group Holding Ltd (HK:9988) rising by 1.65% through the morning.

Bank stocks joined the broader market in the green, with Industrial and Commercial Bank of China (HK:9988) and China Construction Bank (HK: 0939) seeing gains of 1.25% and 0.60%, respectively.

However, CNOOC (HK: 0883) and ENN Energy holdings had a mixed morning. CNOOC rallied by 2.69% through the morning, while ENN Energy Holdings (2688) slipped by 0.17%.

Risk aversion could hit in the afternoon session, however. The investor focus will turn to Fed Chair Powell, who delivers a speech overnight.

Nikkei 225

The Nikkei 225 was up 0.22% this morning. While joining the broader market in positive territory, the gains were modest. The USD/JPY weakened this morning, falling 0.28% to 132.25, with economic data from Japan also weighing.

In December, household spending unexpectedly fell by 2.1%, following a 0.9% decline in November. The fall in spending came despite a marked pickup in wage growth. Average cash earnings were up 4.8% year-over-year versus 1.9% in November.

Fast Retailing Co (9984), Softbank Group Corp (9434), and KDDI Corp (9433) struggled this morning. Softbank Group Corp was down 0.82%, with Fast Retailing Co and KDDI Corp down 0.17% and 0.18%, respectively.

However, Tokyo Electron Ltd (8035) found much-needed support, rising by 0.67%, with Sony Corp (6758) up 0.21%. Advantest Corp (6857) was a front-runner among the most weighted stocks, rallying by 1.85%.