Hang Seng Index, ASX200, Nikkei 225: US Debt Crisis Hits Riskier Assets

Key Insights:

• It was a bearish morning, with the Hang Seng Index leading the ASX 200 and the Nikkei into the red.
• A pickup in US service sector activity failed to deliver early support, with the debt ceiling impasse weighing on investor sentiment.
• There were no economic indicators from Japan, China, or Australia to distract investors this morning.

Market Overview

It was a bearish Wednesday morning session for the Asian markets. The Hang Seng Index led the ASX 200 and the Nikkei into negative territory.

US economic indicators failed to provide early support despite a pickup in service sector activity. While the manufacturing PMI fell from 50.2 to 48.5, the services PMI increased from 53.4 to 54.5. Economists forecast both PMIs to decline to 50.0. The better-than-expected services PMI supported a modest increase in the chances of a June interest rate hike.

According to the CME FedWatch Tool, the probability of a 25-basis point Fed interest rate hike in June stood at 28.1%, up from 25.7% on Monday.

However, while the stats were market-friendly, the US debt ceiling impasse weighed on riskier assets, with the fear of a US default spilling over to the Asian session.

On Tuesday, the NASDAQ Composite Index and the S&P 500 saw losses of 1.26% and 1.12%, respectively, with the Dow falling by 0.69%. This morning, the NASDAQ mini was up 6.5 points, with the Dow gaining 25.

ASX 200

The ASX 200 was down by 0.40%, with bank and mining stocks weighing.

The big-4 had a bearish morning. ANZ Group (ANZ) and the National Australia Bank (NAB) saw losses of 0.48% and 0.58%, respectively. Westpac Banking Corp (WBC) and The Commonwealth Bank of Australia (CBA) were down 0.38% and 0.05%, respectively.

Mining stocks also had a bearish morning. Rio Tinto (RIO) and BHP Group Ltd (BHP) were down 1.55% and 1.16%, respectively, with Fortescue Metals Group (FMG) falling by 1.71%. Newcrest Mining (NCM) was up 0.57%.

However, oil stocks had a bullish morning. Woodside Energy Group (WDS) and Santos Ltd (STO) rose by 0.79% and 0.68%, respectively. Brent Crude was up 0.99% to $77.60 this morning.

Hang Seng Index

The Hang Seng was down 1.20% this morning, with the US debt ceiling woes weighing.

Considering the main components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) saw losses of 0.24% and 1.57%, respectively.

Bank stocks also had a bearish morning session. HSBC Holdings PLC fell by 0.42%, with Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) sliding by 1.82% and 2.08%, respectively.

CNOOC (HK: 0883) was up 0.31% on the rise in crude oil prices.

Nikkei 225

The Nikkei 225 was down 1.04% this morning, with investors ignoring the stronger USD/JPY at 138.4 levels.

Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group bucked the broader market trend, with gains of 0.25% and 1.05%, respectively.

However, Fast Retailing Co (9983) and SoftBank Group Corp. (9984) slid by 2.80% and 2.22%, respectively. Tokyo Electron Limited (8035) and Sony Corp (6758) saw losses of 1.05% and 1.13%, respectively, with KDDI Corp (9433) down by 0.79%.

Check out our economic calendar for economic events.