Hang Seng Index and ASX 200: Diverging Trends Amid Trade Tensions and Tech Gains

US Markets: Nasdaq Enjoys Four-Day Winning Streak

How did the US markets perform on Wednesday, and can the Nasdaq make it five-in-a-row? Here’s what US equity markets revealed.

US equity markets closed higher on Wednesday, December 4. The Nasdaq Composite Index extended its winning streak to four sessions, rallying 1.30%. The S&P 500 and the Dow gained 0.61% and 0.69%, respectively.

Weaker US services sector and labor market data fueled bets on a more dovish Fed rate path. The data coincided with Powell underscoring the Fed’s focus on inflation and the labor market.

US Service PMI and Labor Market Data Fuel Fed Rate Cut Bets

The all-important ISM Services PMI dropped from 56.0 in October to 52.1 in November. Accounting for around 80% of the US GDP, softer services sector growth fueled bets on a more dovish Fed rate path. Notably, the ISM Services Employment PMI dropped from 53.0 to 51.5.

The ADP’s employment change report also missed expectations. Employment increased by 146k in November, down from 184k in October. Economists expected employment to rise by 150k.

Fed Chair Jerome Powell reiterated a cautious approach to rate cuts, citing low unemployment and progress on inflation. However, his positive outlook on the US economy boosted risk appetite, setting a favorable tone for the Asian session.

Bank of Japan Policymaker Nakamura Dims BoJ Rate Hike Bets

On Thursday, Bank of Japan policymaker Toyoaki Nakamura poured cold water on rate hike bets, saying inflation could remain below the 2% target throughout FY2025. Nakamura also raised doubts about sustainable wage growth, suggesting the BoJ might stand pat on monetary policy this month.

Falling bets on a December BoJ rate hike could weaken Japanese Yen demand, potentially boosting export-linked company profits.

Hang Seng Index Declines Amid Stimulus Concerns and Trade Jitters

In Asian markets, the Hang Seng Index declined by 0.97% on Thursday morning, giving up early gains. Concerns about China’s economic outlook and the lack of more stimulus measures from Beijing weighed amid fears of a US-China trade war. Market jitters about US tariffs overshadowed positive sentiment toward the US economy.

Real estate and tech stocks contributed to the decline. Tech giants Alibaba (9988) and Baidu (9888) posted losses of 2.20% and 0.42%, respectively, leaving the Hang Seng Tech Index down 0.70%. The Hang Seng Mainland Properties Index slid by 1.90.

Mainland China’s equity markets also posted morning losses. The CSI 300 and the Shanghai Composite fell by 0.37% and 0.14%, respectively.

Punitive tariffs on Chinese goods and weaker demand may require more meaningful stimulus measures to support the economy. Tariffs and weak demand could impact company earnings and stock prices. A US-China trade war may also affect global trade terms and trade-related company earnings through weaker demand.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on China’s counter to US tariff threats, saying,

“Chinese industry associations have requested domestic companies to be wary of buying chips made in the US, claiming they are ‘no longer safe’.”

Nikkei Advances on BoJ Commentary and Tech Stocks

Japan’s Nikkei Index advanced by 0.69% on Thursday morning. The USD/JPY returned to 150 overnight, driving demand for export-linked stocks. Tech stocks were also on the move, mirroring the Nasdaq’s gains.

Notably, Nissan Motor Corp. (7201) rallied 2.63%, while Softbank Group Corp. (9984) gained 2.25%.

ASX 200 Tracks US Market Gains

Meanwhile, Australia’s ASX 200 Index increased by 0.33% on Thursday morning. Banking, gold, and tech stocks offset mining sector losses. The S&P/ASX All Technology Index rallied 1.10%, tracking the Nasdaq’s gains.

Commonwealth Bank of Australia advanced by 0.85% on upbeat Aussie trade data that signaled a pickup in economic activity. Improving economic conditions could boost credit demand and bank earnings. Aussie exports rebounded in October, rising by 3.6% after sliding by 4.7% in September. Imports also advanced after a sharp decline in the previous month.

Northern Star Resources Ltd. (NST) advanced by 1.05% as gold gained on Wednesday.

However, mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) trended lower, weighed by falling iron ore prices. Iron ore spot prices slid by 1.37% on Thursday morning. Concerns about China’s economy and a potential trade war suggest weaker iron ore demand, impacting price trends.

Outlook

Investors should monitor developments in Chinese stimulus policies, central bank updates, and US trade relations. Positive news from Beijing could ease market jitters, while policy signals from the Fed, RBA, and BoJ will remain key drivers.

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