Hang Seng Index, ASX200, Nikkei 225: US Default Risk Rises

Key Insights:

• It was another bearish morning, with the Hang Seng Index leading the ASX 200 and the Nikkei into negative territory for a second session.
• Investor angst over the US debt ceiling crisis continued to weigh on riskier assets.
• There were no regional economic indicators to distract investors, with the US futures sending mixed signals.

Market Overview

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

There were no US economic indicators from Wednesday to provide direction. The lack of economic indicators left debt ceiling-related news and the overnight FOMC meeting minutes to influence.

On Wednesday, the US administration and Republicans failed to reach an agreement to raise the debt ceiling, increasing the chances of a US default. While both sides of the aisle have time to find common ground, the deadline is looming.

Overnight, the FOMC meeting minutes gave no surprises to distract investors from the debt ceiling crisis. There were no firm indications of what investors should expect in June. However, FOMC members raised concerns about the debt ceiling.

According to the CME FedWatch Tool, the probability of a 25-basis point Fed interest rate hike in June stood at 36.4%, up from 28.1% on Tuesday. The FOMC meeting minutes did not write off a June interest rate hike, with concerns over inflation raising bets on a June move.

On Wednesday, the Dow and the S&P 500 saw losses of 0.77% and 0.73%, respectively, with the NASDAQ Composite Index falling by 0.61%. However, the NASDAQ mini was up 177 points, while the Dow was down by 100.

This morning, there were no economic indicators from the region to draw investor interest, leaving the Hang Seng Index, ASX 200, and the Nikkei under pressure.

ASX 200

The ASX 200 was down by 0.92%, with bank and mining stocks weighing.

The big-4 had a bearish morning. ANZ Group (ANZ) fell by 1.25%, with the National Australia Bank (NAB) and The Commonwealth Bank of Australia (CBA) seeing losses of 1.13% and 1,15%, respectively. Westpac Banking Corp (WBC) declined by 0.87%.

Mining stocks also had a bearish morning. Rio Tinto (RIO) and BHP Group Ltd (BHP) were down 1.28% and 1.24%, respectively, with Fortescue Metals Group (FMG) sliding by 2.85%. Newcrest Mining (NCM) was down by 1.13%.

However, oil stocks had a bullish morning. Woodside Energy Group (WDS) and Santos Ltd (STO) rose by 0.03% and 0.13%, respectively. Brent Crude was up 0.03% to $78.38 this morning.

Hang Seng Index

The Hang Seng was down 1.78% this morning, with the US debt ceiling woes continuing to weigh.

Considering the main components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) saw losses of 1.14% and 2.22%, respectively.

Bank stocks also had a bearish morning session. HSBC Holdings PLC fell by 1.77%, with the Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) declining by 1.40% and 1.16%, respectively.

CNOOC (HK: 0883) was down 2.52%.

Nikkei 225

The Nikkei 225 was down 0.89% this morning, with investors ignoring the stronger USD/JPY at 139.6 levels.

Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group fell by 1.13% and 1.53%, respectively.

Looking at the main components, Fast Retailing Co (9983) and KDDI Corp (9433) were down 0.81% and 1.11%, respectively.

However, Tokyo Electron Limited (8035) bucked the bearish mood, gaining 2.99%, with SoftBank Group Corp. (9984) and Sony Corp (6758) rising by 0.28% and 0.46%, respectively.

Check out our economic calendar for economic events.