Hang Seng Index, Nikkei Index, ASX 200: Nikkei Eyes a Return to 40,000

Summary of the Wednesday Session

The ASX 200 gave up early gains, ending the Wednesday session in negative territory. However, the Hang Seng Index reversed the early losses to end the session in the green.

Overnight US economic indicators from Tuesday and US equity market trends influenced investor sentiment early in the Wednesday session.

US housing sector data drove demand for riskier assets. US building permits increased by 1.9%, with housing starts rising by 10.7% in February. The housing sector data reflected a robust demand environment and a resilient US economy. However, the numbers failed to spook investors before the heavily anticipated Fed interest rate decision.

10-year US Treasury yields fell by 0.72% to 4.293%. On Tuesday, the Dow and S&P 500 saw gains of 0.83% and 0.56%, respectively. The Nasdaq Composite Index ended the day up 0.39%.

On Wednesday, the Asian economic calendar also drew interest. The PBoC left 1-year and 5-year loan prime rates unchanged at 3.45% and 3.95%, respectively. However, recent economic data from China reduced expectations of further central bank policy support.

The Japanese markets were closed on Wednesday in celebration of the Vernal Equinox.

US Federal Reserve and the Asian Economic Calendar in Focus

The overnight FOMC interest rate decision, economic projections, and press conference will set the tone for the Thursday session.

On Wednesday, the FOMC left interest rates at 5.50%. However, the economic projections and press conference drove demand for riskier assets. The Fed Funds Rate projection for 2024 remained at 4.6%, while the Fed raised its 2024 growth projection from 1.4% to 2.1%.

Fed Chair Powell reiterated views from recent testimony on Capitol Hill, believing the Fed will start cutting rates this year.

10-year US Treasury yields responded to the projections and press conference, falling by 0.37% to 4.277%. The US equity markets reacted to the forward guidance from the Fed. On Wednesday, the Nasdaq Composite Index rallied by 1.25%. The Dow and S&P 500 saw gains of 1.03% and 0.89%, respectively.

While the Fed will set the tone for the Thursday session, the Asian economic calendar also needs consideration. Preliminary private sector PMI numbers from the region, trade data from Japan, and employment figures from Australia will draw investor interest.

Upbeat service sector data from Japan and better-than-expected trade data could support demand for the Yen at the expense of Nikkei-listed export stocks. Economists forecast the Jibun Bank Services PMI to increase from 52.9 to 53.4 and exports to increase by 5.3% year-on-year in Feb. In January, Exports increased by 11.9% year-on-year.

Employment data from Australia could influence the RBA rate path and near-term trends for the ASX 200. Economists expect the Australian unemployment rate to fall from 4.1% to 4.0% in February.

On Thursday, the ASX 200 and Nikkei futures were up 49 and 770 points, respectively.

ASX 200

The ASX 200 declined by 0.10% on Wednesday. Bank, gold, and tech stocks contributed to the losses. The S&P ASX All Technology Index (XTX) slipped by 0.04%.

Gold (XAU/USD) stocks Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. slid by 3.18% and 2.94%, respectively. Wednesday declines in gold prices on a stronger US dollar pressured the Aussie gold stocks.

ANZ Group Holdings Ltd. (ANZ) and Westpac Banking Corp. (WBC) saw losses of 0.38% and 0.27%. Commonwealth Bank of Australia (CBA) and National Australia Bank Ltd. (NAB) slipped by 0.11% and 0.09%, respectively.

However, mining and oil stocks limited the downside. Hopes of a pickup in demand contributed to the sector gains.

Rio Tinto Ltd. (RIO) and BHP Group Ltd (BHP) advanced by 0.76% and 0.50%, respectively. Fortescue Metals Group Ltd. (FMG) gained 0.86%.

Woodside Energy Group Ltd (WDS) ended the day up 0.26%, while Santos Ltd (STO) closed the session flat.

Hang Seng Index

On Wednesday, the Hang Seng Index gained 0.08%. Real estate and tech stocks contributed to the gains. The Hang Seng Mainland Properties Index (HSMPI) and Hang Seng Tech Index (HSTECH) increased by 1.25% and 0.65%, respectively.

Alibaba (9988) and Tencent (0700) advanced by 0.21% and 1.35%, respectively.

Bank stocks had a mixed Wednesday session. HSBC (0005) gained 0.17%. China Construction Bank (0939) and Industrial Commercial Bank (1398) declined by 0.21% and 0.26%, respectively.

The Nikkei 225

(Graph for reference purposes only)

There was no trading on the Nikkei on Wednesday.

For upcoming economic events, refer to our economic calendar.