Hang Seng and Nikkei Indexes Fall as China and BoJ Concerns Rise

US Markets: Nasdaq Ends Five-Day Losing Streak

US equity markets closed higher on Friday, January 3, ending extended losing streaks. The Dow advanced by 0.80%, while the Nasdaq Composite Index and the S&P 500 gained 1.77% and 1.26%, respectively.

Dip buyers returned after profit-taking triggered five-day losing streaks for the Nasdaq and S&P 500. However, concerns about Trump’s pro-growth agenda fueling inflation and a more hawkish Fed remained a US equity market headwind.

Crypto-related stocks contributed to Friday’s gains amid speculation about a US Strategic Bitcoin (BTC) Reserve (SBR). MicroStrategy (MSTR) surged by 13.22%, while Marathon Holdings (MARA) jumped by 14.12%, boosting the Nasdaq’s performance.

US Manufacturing PMI Signals Improving Demand, Raising Questions About Fed Policy

On Friday, the ISM Manufacturing PMI rose to 49.3 in December, up from 48.4 in November. New orders increased for the second month, indicating an improving demand environment. Additionally, prices increased while manufacturers reduced staffing levels.

The PMI data suggested a potential recovery in the manufacturing sector, supporting expectations for broader economic growth.

China’s Caixin Services PMI Beats Forecasts

On Monday, January 6, China’s Caixin Services PMI climbed to 52.2 in December from 51.5 in November, beating expectations of 51.7. The December survey highlighted key trends, including:

• Rising domestic demand while export business declined for the first time since August 2023.
• Outstanding work accumulated because of higher inflows.
• Employment fell for the first time since August despite intensifying capacity pressures.
• Wages and input material costs pushed input prices higher, with service providers passing rising costs onto clients.
• While new orders increased, optimism weakened to its lowest since March 2020. Concerns about international trade and competition weighed on sentiment.

Dr. Wang Zhe, Senior Economist at Caixin Insight Group, remarked on the PMI data, stating:

“Competitive markets together with uncertainties over global trade were the main concerns of the surveyed businesses.”

Despite the upswing in the Services PMI, the Caixin Composite PMI fell from 52.3 in November to 51.4 in December. Notably, falling employment and weaker overseas demand may undermine Beijing’s efforts to bolster the economy.

Hang Seng Index Falls Amid China Concerns

In Asian markets, the Hang Seng Index declined by 0.27% on Monday morning. Market sentiment toward China’s economy weighed on Hong Kong-listed stocks. Additionally, the ongoing threat of US tariffs remained a headwind, leaving the Index below 20,000.

Real estate and tech stocks contributed to the morning losses. Hang Seng Mainland Properties Index fell 0.50%, while the Hang Seng Tech Index dipped by 0.07%. The Major tech players Alibaba (9988) and Baidu (9888) were down 0.25% and 0.48%, respectively.

Mainland China-listed stocks also edged lower, reflecting concerns about economic growth. The CSI 300 and Shanghai Composite declined by 0.04% and 0.15%, respectively.

Nikkei Slides on Rate Hike Uncertainty

On Monday, Japan’s markets reopened after the holidays, with the Nikkei Index sliding 1.34%. Investors locked in profits amid uncertainty about January’s Bank of Japan interest rate decision.

Japan’s Jibun Bank Services PMI increased from 50.5 in November to 50.9 in December. Rising prices and employment could support a January BoJ rate hike. A rate hike may fuel Japanese Yen demand, potentially weighing on overseas earnings and stock prices. The morning pullback came despite the USD/JPY advancing by 0.28% to 157.704.

Nissan Motor Corp. (7201) tumbled by 3.02%, while Sony Corp. (6758) declined by 2.26%. Tech stocks Tokyo Electron (8035) and Softbank Group Corp. (9984) bucked the trend, advancing by 0.43% and 1.24%, respectively. Friday’s Nasdaq gains drove tech stock demand.

ASX 200 Bucks the Trend

Meanwhile, Australia’s ASX 200 Index extended its gains from Friday, advancing by 0.13%. Banking, oil, and tech-related stocks contributed to the morning gains, while mining stocks stumbled.

Key movers included the Commonwealth Bank of Australia (CBA), which rose 0.67% on expectations for a February RBA rate cut. Lower borrowing costs could boost credit demand, supporting bank earnings. Woodside Energy Group (WDS) rallied 1.07% following Friday’s crude oil price gains.

However, mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) slid by 1.82% and 1.65%, respectively. Friday’s slump in iron ore prices continued into the Monday session, weighing on mining stocks.

Outlook

The week ahead could be pivotal for Asian markets. Key factors to monitor include:

• US tariff developments: Tariffs could impact China’s exports, affecting China-dependent economies like Australia.
• Hawkish central bank signals could pressure rate-sensitive sectors such as tech and real estate.
• Beijing’s stimulus efforts may offset weaker external demand.

Overall, market sentiment remains fragile, with significant risks tied to global trade and monetary policy. Explore how these developments might influence your portfolio here.