ASX 200: Tracks US Rally, Tech and Gold Stocks Lead Gains

US Equity Markets: Caution Turns to Optimism

The US equity markets had a positive Tuesday, August 13, session. The Nasdaq Composite Index and S&P 500 rallied 2.43% and 1.68%, respectively, while the Dow gained 1.04%.

Starbucks (SBUX) surged 24.50%, contributing to the Nasdaq gains, after naming Brian Niccol, formerly of Chipotle Mexican Grill, as the new Chairman and CEO.

US Producer Prices Fuel Fed Rate Cut Bets

Softer-than-expected US producer prices raised expectations of multiple 2024 Fed rate cuts on Tuesday, driving buyer demand for riskier assets. US producer prices increased by 0.1% in July, down from 0.2% in June.

Fed rate cuts in response to softer inflation could boost buyer demand for riskier assets. Conversely, Fed rate cuts to bolster the US labor market and economy could impact the broader Asian equity markets.

Expert Commentary

Arch Capital Global Chief Economist Parker Ross commented on the July producer price data from Tuesday, August 13, saying,

“This is certainly the type of inflation report the Fed wants to see and markets agree, with the 10y UST moving down to 3.88% from 3.91 at yesterday’s close. […]. Market odds of a 50bps rate cut in September rose above 60% from ~55% at yesterday’s close.”

China Growth Concerns Linger

On Wednesday, concerns about the Chinese economy lingered ahead of crucial economic data from China on Thursday. Retail sales, industrial production, fixed asset investment, and unemployment figures will give investors a view of the Chinese economy entering Q3 2024.

In Q2 2024, the Chinese economy grew by 4.7%, down from 5.3% in Q1 2024.

Hang Seng and Mainland China See Red

The Hang Seng Index declined by 0.25% on Wednesday, with concerns about the Chinese economy overshadowing hopes of a Fed rate cut. Investor caution ahead of pivotal earnings releases also contributed to the losses, particularly in the tech and real estate sectors.

The Hang Seng Mainland Properties Index (HSMPI) declined by 0.24%, while the Hang Seng Tech (HSTECH) Index fell by 0.55%. Alibaba (9988) and Tencent (0700) saw losses of 0.25% and 1.46%, respectively, while Baidu (9888) gained 0.30%.

Mainland equity markets joined the Hang Seng in negative territory. The CSI 300 and the Shenzhen Composite Index were down 0.63% and 0.58%, respectively.

Nikkei Index Extends Gains from Tuesday

The Nikkei Index was up 0.86% on Wednesday morning, with a steady USD/JPY supporting demand for Nikkei-listed stocks.

Softbank Group Corp. (9984) advanced by 1.76%, while Sony Corp. (6758) gained by 0.62%. Nissan Motor Corp. (7201) rose by 0.79%.

Additionally, reports of Japan’s Prime Minister Fumio Kishida stepping down contributed to the gains. Political scandals and economic woes marred his time in office. A new leader could give the Japanese economy a new lease of life.

ASX 200 Extends Its Gains from Monday

The ASX 200 Index advanced by 0.61% on Wednesday morning, tracking the overnight gain in the US. Bank, gold, and tech stocks were the main contributors.

The S&P/ASX All Technology Index rallied 1.93%. Gold-related stock Evolution Mining Ltd. (EVN) jumped by 8.66%, while Australia New Zealand Bank (ANZ) advanced by 1.31%.

Investors should remain alert amidst China’s economic growth jitters and shifting sentiment toward the US economy. Closely monitor the news wires, real-time data, and expert commentary to manage trading strategies accordingly. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.