Hang Seng Index, Nikkei 225, ASX 200: Fed Rate Cut Bets Drive Tech Stocks Higher

Bob Mason
Updated: Jun 6, 2024, 06:48 GMT+00:00

Key Points:

  • Overnight US economic indicators from Wednesday (June 5) raised investor expectations of a September Fed rate cut.
  • The Asian equity markets reacted to the US stats, with the ASX 200, Hang Seng Index, and Nikkei 225 enjoying Thursday morning (June 6) gains.
  • Economic indicators Australia and Bank of Japan commentary also influenced market risk sentiment.
Hang Seng Index, Nikkei 225, ASX 200,

In this article:

US ADP Private Payrolls Raise Bets on a Fed Rate Cut

Overnight US economic indicators from Wednesday (June 5) raised investor bets on a September Fed rate cut. US labor market data and Services PMI numbers attracted investor attention.

ADP private payrolls increased by 152k in May after advancing by 188k in April. Economists expected an increase of 175k.

Additionally, the ISM Services PMI jumped from 49.4 to 53.8 in May. Despite expanding in May, firms continued to cut staffing levels. Furthermore, the ISM Services Prices Index fell from 59.2 to 58.1. Softer price trends could ease services sector contributions to headline inflation and support a less hawkish Fed interest rate trajectory.

According to the CME FedWatch Tool, the probability of the Fed leaving interest rates unchanged in September fell from 33.0% to 31.4%.

On Wednesday, US Treasuries declined by 1.22%, extending its losing streak to five sessions. The Nasdaq Composite Index and the S&P 500 rallied 1.96% and 1.18%, respectively. Furthermore, the Dow gained 0.25%.

The overnight gains across the US equity markets set the tone for the Thursday Asian session (June 6).

However, Asian economic indicators and the US futures contributed to the Thursday morning session gains. The Nasdaq mini was up 24 points.

Hang Seng Index Leads the Mainland China Markets

Hang Seng Index in the green on Thursday.
HSI 060624 Daily Chart

The mainland China indexes had a mixed start to the Thursday session. The Shenzhen Composite Index slipped by 0.03%, while the CSI 300 gained 0.14%. The real estate sector was a drag.

However, investor expectations of a Fed rate cut drove buyer demand for Hang Seng Index-listed stocks. The Hang Seng Index was up 0.76% on Thursday.

Tech stocks contributed to the gains, while real estate stocks limited the upside. The Hang Seng Tech Index (HSTECH) was up 1.13%, while the Hang Seng Mainland Properties Index (HSMPI) slid by 1.28%.

Baidu (9888) and Tencent Holdings (0700) advanced by 0.96% and 0.92%, respectively. Alibaba (9988) was up by 0.52%.

Nikkei in Recovery on Yen Stumble

Nikkei Index up on Thursday.
Nikkei 060624 Daily Chart

The Nikkei Index was up 1.13% on Thursday morning. A USD/JPY return to 156 drove buyer demand for Nikkei Index-listed export stocks.

Bank of Japan Board member Nakamura poured cold water on investor speculation about a 2024 BoJ interest rate hike. Nakamura said that wage growth has not fueled inflationary pressures. The BoJ Board member felt it appropriate to leave monetary policy unchanged, with inflation unlikely to reach 2% until 2025.

Tokyo Electron Ltd. (8035) and Softbank Group Corp (9984) surged 4.62% and 3.66%, respectively. Sony Group Corporation (6758) advanced by 1.56%, with KDDI Corp. (9433) gaining 0.51%. Fast Retailing Co. Ltd. (9983) was up 0.10%.

ASX 200 Tracks the US Markets into Positive Territory

ASX 200 tracks the US equity markets into positive territory.
ASX200 060624 Daily Chart

The ASX 200 was up 0.77% on Thursday morning, tracking overnight gains from the US session.

Australian economic indicators sent mixed signals but failed to affect buyer demand for ASX-listed stocks.

Home loans jumped by 4.3% in April after rising by 2.8% in March. The trade surplus widened from A$5.024 billion to A$6.548 billion in April. However, import and export figures painted a grim demand picture. Imports tumbled by 7.2% after rising by 4.2% in March. Exports declined by 2.5% after increasing by 2.8% in March.

Nevertheless, banking, gold, oil, and tech stocks contributed to the gains for the ASX 200. The S&P/ASX All Technology Index was up 0.51%.

Gold-related stocks Northern Star Resources Ltd. (NST) and Evolution Mining Ltd (EVN) rallied 2.65% and 2.02%, respectively. Gold spot (XAU/USD) extended gains from Wednesday, advancing by 0.75% to $2,373.

Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) rose by 0.81% and 0.80%, respectively. WTI crude oil continued the recovery from sub-$74.

Commonwealth Bank of Australia (CBA) rallied 1.78%, with ANZ Group Holdings Ltd. (ANZ) gaining 1.04%. National Australia Bank Ltd. (NAB) and Westpac Banking Corp. (WBC) were up 0.46% and 0.78%, respectively.

However, mining stocks had a mixed Thursday. Fortescue Metals Group Ltd. (FMG) rose by 0.48%, while BHP Group Ltd (BHP) was flat. Rio Tinto Group Ltd. (RIO) declined by 0.93%. Spot iron ore prices partially reversed losses from Wednesday, delivering a mixed morning.

For upcoming economic events, refer to our economic calendar.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

Did you find this article useful?