Hang Seng Index News: Fed Rate Jitters and Weak China PMI Weigh on Bulls

Hang Seng Index Dips as US Inflation Indicators and China Data Test Sentiment

The Hang Seng Index fell in early trading on Friday, August 1, potentially extending a three-day losing streak. Overnight US economic data sank investor bets on a September Fed rate cut, weighing on the Hang Seng Index. PMI numbers from China added to the market gloom, overshadowing hopes for fresh stimulus from Beijing.

Next week, trade developments, China’s services sector PMI (out on August 5), trade data (out on August 7), and stimulus news from Beijing will dictate market sentiment. These key drivers will determine whether the Index breaks below 24,500 or rises toward 26,000.

Hang Seng Index and Mainland Markets Diverge after Thursday Sell-Off

The Hang Seng Index declined 0.26% to 24,710 in early trading, partially recovering from a low of 24,693. In contrast, Mainland China’s markets posted gains despite weaker-than-expected Manufacturing PMI data from China. The CSI 300 and the Shanghai Composite Index advanced 0.04% and 0.02%, respectively, on hopes of fresh stimulus from Beijing.

Overnight, US equity markets posted losses as the Personal Income and Outlays Report signaled a more hawkish Fed rate path. The Core PCE Price Index rose 2.8% year-on-year in June, matching May’s rise. Economists had expected the Index to increase 2.7%. Personal income and spending also rebounded in June. According to the CME FedWatch Tool, the probability of a September Fed rate cut dropped from 47.6% on July 30 to 41.2% on July 31.

The Dow slid 0.74%, while the Nasdaq Composite Index and the S&P 500 fell 0.03% and 0.37%, respectively.

Meta Platforms (META) and Microsoft (MSFT) soared 11.25% and 3.95%, respectively, on earnings reports, helping limit the Nasdaq’s losses to just 0.03%.

EV and Tech Stocks Extend Losses

Electric vehicle (EV) stocks and the broader tech sector dragged the Hang Seng Index into negative territory. BYD (1211) and Li Auto (2015) fell 0.26% and 2.22%, respectively, while Tencent (0700) slipped 0.18%.

However, upbeat US corporate earnings results limited the downside. Tech heavyweights Alibaba (9988) and Baidu (9888) climbed 1.99% and 2.13%, respectively.

China Manufacturing Sector PMI Spooks Investors

On August 1, PMI data from China signaled a further loss in economic momentum, weighing on sentiment. The S&P Global China General Manufacturing Index fell from 50.4 in June to 49.5 in July, crucially below the 50 neutral level.

Weaker export orders, falling employment, and higher prices were key highlights from the July survey. Theses trends reflected the impact of tariffs on demand. Labor market and price trends may also challenge Beijing’s efforts to bolster the economy.

On August 1, CN Wire reported Beijing’s latest policy pledges, stating:

“More measures to stabilize jobs and economy to roll out gradually. To strengthen economic monitoring and policy reserves. To regulate disorderly business competition.”

Addressing the domestic price war and stabilizing the labor market would be crucial to Beijing’s efforts in boosting private consumption.

Technical Setup: Hang Seng Drops Toward Crucial 25,000 Support

A third consecutive day of losses sent the Hang Seng Index toward the July congestion zone. However, despite the pullback, the Index remained above the 50-day Exponential Moving Average (EMA), suggesting a bullish bias.

Progress toward a US-China trade agreement and fresh stimulus measures from Beijing may boost sentiment and send the Hang Seng Index toward 25,000. A breakout above 25,000 could enable the bulls to target the July 24 high of 25,736.

Conversely, the risk of a sharper reversal lingers. The Hang Seng Index could drop toward the 24,500 level, exposing the 50-day EMA, if a US-China trade deal remains elusive.

Hang Seng Technical Outlook

• Resistance: 25,000, 25,500, then 25,736.
• Support: 24,500 and the 50-day EMA (24,254).
• The short-term bias remains bullish but hinges on US-China trade developments, Beijing’s stimulus measures, and upcoming Chinese economic data.

Hang Seng Forecast: Will the Index Break Below 24,500 or Retarget 26,000?

The Hang Seng Index continued retreating from the three-and-a-half-year high set on July 24. Concerns about China’s economic outlook coincided with the hotter-than-expected US Personal Income and Outlays Report. The US data lowered bets on a September Fed rate cut.

While Beijing continues pledging policy support, the introduction of effective stimulus measures will likely be crucial in countering waning external demand.

Slowing economic momentum may push the Hang Seng Index toward 24,500, bringing the 50-day EMA into sight. However, progress toward a trade deal and effective stimulus could send the Index toward 25,000, bringing 25,736 into sight.

Near-term trends will hinge on tariff developments, China’s economic data, and Beijing’s policy measures.

Stay informed with real-time updates. US-China trade headlines will continue to drive sentiment. Follow our live coverage and consult our economic calendar.