Hang Seng Index and ASX 200 Climb on Powell Speech While the Nikkei Slides

US Equity Markets Rally on Fed Chair Powell’s Speech

On Friday, August 23, the US equity markets rallied in response to Fed Chair Powell’s highly anticipated speech at Jackson Hole. The Nasdaq Composite Index advanced by 1.47%, while the Dow and the S&P 500 saw gains of 1.14% and 1.15%, respectively.

10-year US Treasury yields declined, driving demand for riskier assets as Fed Chair Powell greenlit a September Fed rate cut. Powell noted the need to adjust the Fed’s policy while highlighting concerns about weakness in the labor market.

Expert Views on Powell’s Speech

Thomas Thornton, founder of Hedge Fund Telemetry, commented on Fed Chair Powell’s speech, stating,

“The takeaway from Powell that stood out to me is the concern for rising unemployment. As a reminder when it starts to rise, it continues for multiple quarters/years.”

Despite concerns about the US labor market, Powell’s signal for a Fed rate cut set the tone for the Asian markets on Monday.

The Bank of Japan Rate Path, the USD/JPY, and the Nikkei

On Friday, the USD/JPY slid to a low of 144.045. A hawkish Bank of Japan Governor and dovish Fed Chair sent the USD/JPY toward 143.500.

Bank of Governor Kazuo Ueda spoke in parliament, stating that further rate hikes were likely if inflation and the economy moved in line with forecasts.

On Monday, the USD/JPY extended its losses from Friday (-1.33%), falling 0.35% to 143.827, weighing on demand for Nikkei Index-listed stocks.

Hang Seng and Mainland China Indexes Diverge

The Hang Seng Index advanced by 0.90% on Monday morning. Real estate and tech stocks contributed to the gains as investors reacted to Fed Chair Powell’s speech.

The Hang Seng Mainland Properties Index (HSMPI) rallied by 1.90%, while the Hang Seng Tech (HSTECH) gained 0.61%.

Notable movers included Bilibili (9626), which surged by 7.47% on news of Barclays upgrading the stock from Hold to Overweight. Baidu (9888) and Tencent (0700) rose by 2.19% and 1.07%, respectively. Alibaba (9988) was up by 0.31%.

In contrast, the Mainland equity markets faced morning losses, with the CSI 300 and the Shanghai Composite Index down by 0.30% and 0.18%, respectively. Concerns about the Chinese economy lingered as investors awaited fresh stimulus measures.

Nikkei Index Slides on USD/JPY Retreat

The Nikkei Index declined by 1.09% on Monday morning, with a hawkish BoJ and a weaker USD/JPY contributing.

Nissan Corp. (7201) tumbled by 4.68%, while Tokyo Electron Ltd. (8035) slid by 2.10%. Softbank Group Corp. (9984) saw a more modest 0.26% loss.

ASX 200 Tracks the Dow Higher

The ASX 200 Index advanced by 0.50% on Monday morning, tracking Friday’s US equity market gains. Tech, oil, and gold-related stocks contributed to the morning gains. The S&P/ASX All Technology Index rallied 0.88%

Gold-related stock Northern Star Resources Ltd. (NST) advanced by 0.63% on spot gold’s 1.11% gain off Powell’s speech.

Meanwhile, oil-related stocks also gained, after WTI crude oil ended Friday up 2.49% to $74.83. Woodside Energy Group (WDS) rose by 1.70% on Monday.

Investors should remain alert, with central bank commentary pivotal after the Jackson Hole Symposium. 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.