Hang Seng and Nikkei: US Sell-Off and Rising Yields Set Risk-Off Tone in Asia

US Markets Slide as Yields Rise

Here’s a breakdown of Friday, December 27, in US equity markets.

US equity markets posted losses as investors locked in profits before the end of the year. The Nasdaq Composite Index and the S&P 500 dropped by 1.49% and 1.11%, respectively, while the Dow declined by 0.77%.

Concerns about a more hawkish Fed rate path drove US Treasury yields higher, impacting investor sentiment. 10-Year US Treasury yields stood at seven-month highs on Friday.

Bitcoin’s (BTC) pullback to $94,242 weighed on crypto-related stocks. MicroStrategy (MSTR) fell 3.24%, while Marathon Holdings (MARA) slid by 4.46% as BTC retreated further from the December 17 all-time high of $108,231.

Rising US Treasury yields and the US market sell-off likely set the tone for the Asian Monday session.

US Inventories Signal Weak Demand for Autos

On Friday, US inventory figures suggested a potential fall in auto demand. Wholesale inventories slipped by 0.2%, while retail inventories excluding autos rose in November.

Falling inventories could signal concerns about the effects of a more hawkish Fed rate path on auto financing and demand. Notably, auto stocks Tesla Inc. (TSLA) fell 4.95%, while Ford Motor Co. (F) posted a 0.40% loss.

China Signals Support Amid Global Weakness

On Monday, December 30, CN Wire reported news of the People’s Bank of China (PBoC) signaling rate cuts, stating,

“PBOC’s governor Pan Gongsheng said that the average deposit reserve ratio of Chinese banks is approximately 6.6%. This level, compared to central banks in major economies internationally, still offers some room for adjustment. His statement suggests the possibility of further interest rate cuts.”

Lower borrowing costs and recent fiscal stimulus measures targeting domestic demand could bolster China’s economy.

Hang Seng Index Falls on Rising Treasury Yields

In Asian markets, the Hang Seng Index declined by 0.29% on Monday morning. Rising US Treasury yields and sentiment toward the Fed rate path weighed on investor appetite. Real estate and tech stocks contributed to the morning losses.

The Hang Seng Mainland Properties Index dropped by 0.51%, while the Hang Seng Tech Index was down by 0.59%. Tech giants Alibaba (9988) and Baidu (9888) posted losses of 0.73% and 1.35%, respectively.

Meanwhile, Mainland China markets had a positive start to the Monday session on policy measures. The CSI 300 advanced by 0.46%, while the Shanghai Composite gained 0.22%.

Despite the morning gains, US tariff threats remain a headwind for the Mainland China markets.

Nikkei Index Retreats Amid BoJ Policy Uncertainty

Japan’s Nikkei Index declined by 0.75% on Monday morning despite the USD/JPY hovering at the 157 level. Tech stocks contributed to the morning pullback, tracking Friday’s US market retreat.

However, uncertainty about the BoJ’s near-term policy goals likely influenced investor sentiment. A more hawkish BoJ rate path may drive Japanese Yen demand, potentially affecting company earnings from overseas.

Tech stocks Tokyo Electron (8035) and Softbank Group (9984) declined by 0.37% and 0.88%, respectively. Sony Corp. (6758) slid by 1.55%. However, Nissan Motor Corp. (7201) led the losses, tumbling 5.64% amid lingering uncertainty about a potential merger with Honda Motor Corp. (7267).

ASX 200 Tracks US Losses

Meanwhile, Australia’s ASX 200 Index fell 0.63%, potentially ending a three-day winning streak. The Index tracked the US markets into negative territory. Banking, gold, and tech sectors led the morning losses.

Notably, the S&P/ASX All Technology Index shed 0.63%, while Northern Star Resources Ltd. (NST) dipped by 0.54%, pressured by gold’s Friday pullback. Rising Treasury yields weighed on gold prices.

Aussie banks Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) declined by 1.17% and 0.85%, respectively. Rising US Treasury yields eased investor demand for high-yielding Aussie bank stocks.

Outlook

As 2024 nears its close, thin holiday trading may amplify market volatility. Investors should monitor Chinese PMI data, US tariff developments, and Beijing’s stimulus measures. Weak PMI figures or escalating trade tensions could weigh on risk appetite, creating choppy market conditions.

For in-depth analysis of the Hang Seng Index and global market trends, click here.