Hang Seng Index, Nikkei 225, ASX 200: Futures Flash Green Pre-Fed

Summary of the Tuesday Session

The Nikkei and ASX 200 ended the Tuesday session in positive territory, while the Hang Seng Index reversed the gains from Monday.

Overnight US economic indicators from Monday further reduced bets on an H1 2024 Fed rate cut. The NAHB Housing Market Index increased from 48 to 51 in March amidst an elevated mortgage rate environment.

10-year US Treasury yields rose by 0.32% to 4.324%. However, dip buyers returned from the sidelines, supporting gains across the US equity markets. On Monday, the Nasdaq Composite and S&P 500 saw gains of 0.82% and 0.63%, respectively. The Dow ended the day up 0.20%.

The Asian economic calendar garnered investor interest on Tuesday. Central banks were in focus. The Bank of Japan raised interest rates for the first time in 17 years, while the RBA left the cash rate unchanged.

Forward guidance was pivotal. The RBA delivered a less hawkish stance, toning down the chances of an RBA rate hike. After exiting negative rates, the markets expect the BoJ to leave interest rates at zero for the foreseeable future, with the markets pricing in the exit.

A weaker USD/JPY supported buyer demand for Nikkei-listed export stocks.

However, falling bets on an H1 2024 Fed rate cut left the Hang Seng Index in negative territory.

US Equities, Fed Jitters, and the PBoC

US equity market movements from the Tuesday session could influence buyer demand for riskier assets on Wednesday. Overnight US housing sector data supported the appetite for riskier assets before the heavily anticipated Fed interest rate decision.

US building permits increased by 1.9%, with housing starts surging 10.7% in February, signaling robust demand and a resilient US economy.

Hopes of an H1 2024 Fed rate cut impacted 10-year US Treasury yields, which declined by 0.72% to 4.293%. On Tuesday, the Nasdaq Composite Index rose by 0.39%. The Dow and S&P 500 ended the session up 0.83% and 0.56%, respectively.

While the US equity markets could set the tone for the Wednesday session, the PBoC will be in focus. The PBoC will announce the 1-year and 5-year loan prime rates. Economists expect the PBoC to leave the 1-year and 5-year LPRs at 3.45% and 3.95%, respectively. An unexpected cut to LPRs could drive buyer demand for riskier assets.

However, Fed jitters may surface before the looming FOMC interest rate decision, projections, and press conference.

On Wednesday, the ASX 200 and Nikkei futures were up 13 and 210 points, respectively. The markets in Japan are closed on Wednesday.

ASX 200

The ASX 200 ended the Tuesday session up 0.36%. Gold, mining, and oil stocks contributed to the gains. The S&P ASX All Technology Index (XTX) declined by 0.15%.

Rio Tinto Ltd. (RIO) and BHP Group Ltd (BHP) rallied 2.48% and 2.78%, respectively. Fortescue Metals Group Ltd. (FMG) jumped by 3.59%.

Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) saw gains of 2.33% and 1.77%, respectively.

Gold (XAU/USD) stocks Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. increased by 1.39% and 1.49%, respectively.

However, bank stocks ended the Tuesday session in negative territory.

Commonwealth Bank of Australia (CBA) declined by 0.58%. National Australia Bank Ltd. (NAB) and Westpac Banking Corp. (WBC) saw losses of 0.26% and 0.30%. ANZ Group Holdings Ltd. (ANZ) fell by 0.21%.

Hang Seng Index

On Tuesday, the Hang Seng Index slid by 1.24%. Property stocks continued to see heavy losses. The Hang Seng Mainland Properties Index (HSMPI) slid by 2.84%. Tech stocks also ended the session in negative territory. The Hang Seng Tech Index (HSTECH) declined by 1.83%.

Alibaba (9988) and Tencent (0700) saw losses of 1.25% and 1.66%, respectively.

Bank stocks also had a negative session. HSBC (0005) fell by 0.17%. China Construction Bank (0939) and. Industrial Commercial Bank (1398) declined by 1.05% and 1.01%, respectively.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei gained 0.66% on Tuesday.

Bank stocks ended the session in negative territory. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) fell by 0.12% and 0.39%, respectively.

However, it was a mixed Tuesday session for the main components of the Nikkei.

KDDI Corp. (9433) and Tokyo Electron Ltd. (8035) saw gains of 1.47% and 1.52%, respectively.

Sony Group Corporation (6758) and Softbank Group Corp. (9948) ended the day up 0.98% and 0.35%, respectively.

Fast Retailing Co. Ltd. (9983) bucked the trend, falling by 1.13%.

For upcoming economic events, refer to our economic calendar.