Hang Seng Index Advances Alongside the Nikkei and ASX 200 on Fed Rate Cut Bets

US Equity Markets Gain on Dovish Fed Minutes

On Wednesday, August 21, the US equity markets resumed their upward trend. The Nasdaq Composite Index advanced by 0.57%, while the Dow and the S&P 500 saw gains of 0.14% and 0.42%, respectively. These gains were modest as investors awaited Fed Chair Powell’s speech at the Jackson Hole Symposium on Friday, August 23.

FOMC Meeting Minutes

The FOMC Meeting Minutes supported buyer demand for riskier assets, signaling a possible September Fed rate cut. Members noted that the risks to achieving the Fed’s ‘employment and inflation goals had continued to move into better balance.’ Additionally, Committee members considered the current monetary policy stance restrictive, possibly impacting economic growth.

A more dovish Fed rate path may reduce borrowing costs, possibly boosting company profits and stock prices.

Expert Views on the Minutes

Wall Street Journal Chief Economics Correspondent Nick Timiraos remarked on the Meeting Minutes, saying,

“The Powell Fed is at a crossroads. The debate over when to cut is over, and the conversation around how fast to go is heating up. A soft landing is tantalizingly close because the economy has hewed closer to an optimistic scenario Fed officials outlined.”

The dovish FOMC Meeting Minutes, coupled with overnight gains in US equity markets, set the tone for the Thursday Asian session.

Service Sector PMIs to Test RBA and BoJ Policy Stances

On Thursday, private sector PMIs from Australia and Japan may influence sentiment toward the monetary policies of the Bank of Japan and Reserve Bank of Australia.

The Australia Judo Bank Services PMI increased from 50.4 in July to 52.2 in August. Employment and input prices rose, fueling speculation about an RBA rate hike. Nevertheless, a pickup in service sector activity could boost the Australian economy, contributing over 70% to GDP.

Japan’s Jibun Bank Services PMI rose from 53.7 in July to 54.0 in August. While input prices trended higher, output prices declined, signaling possible margin pressures. Rising input prices and labor market constraints may raise investor expectations of a Q4 2024 BoJ rate hike. A more hawkish BoJ rate path could drive Yen demand, possibly impacting on Nikkei-listed export stocks.

Hang Seng and Mainland China Indexes Diverge

The Hang Seng Index was up 0.14% on Thursday morning. Tech stocks contributed to the gains, while real estate sector woes limited the upside.

The Hang Seng Mainland Properties Index (HSMPI) tumbled 2.28%, while the Hang Seng Tech (HSTECH) rose by 0.25%. Baidu (9888) advanced by 1.76%, with Alibaba (9988) and Tencent (0700) gaining 0.19% and 0.13%, respectively. JD.com (9618) steadied following Wednesday’s Walmart (WMT) induced sell-off, rising by 1.56%.

However, the Mainland equity markets saw losses on Thursday morning. The CSI 300 and the Shenzhen Composite Index declined by 0.33% and 0.55%, respectively. Concerns about China’s real estate sector and the lack of a fresh stimulus package negatively impact the Mainland equity markets.

Nikkei Index Advances as USD/JPY Steadies

The Nikkei Index rose 0.63% on Thursday morning, with a USD/JPY return to 145 contributing. Upbeat service sector PMIs raised expectations of a positive Q3 2024, contributing to the gains.

Fast Retailing Co. Ltd (9983) rallied 2.39%, while Sony Corp. (6758) gained 0.26%. However, Nissan Corp. (7201) was down 1.36% on demand concerns. The Jibun Manufacturing PMI reflected a subdued demand environment.

ASX 200 Advances on Fed Rate Cut Bets

The ASX 200 Index advanced by 0.17% on Thursday morning, following overnight gains from the US markets. Moreover, the ASX 200 was on track for a 10-day winning streak. Tech and gold-related stocks contributed. However, the lingering threat of an RBA rate hike limited the gains.

Gold-related stock Northern Star Resources Ltd. (NST) rallied 2.05% as gold held onto $2,500. The S&P/ASX All Technology Index advanced by 1.19%. WiseTech Global Ltd. (WTC) surged 9.45% after beating earnings forecasts on Wednesday.

Investors should remain alert, with earnings and central bank commentary pivotal after the 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.