Hang Seng Index and Nikkei 225 Slide Amid Yen Strength and US Debate Uncertainty

US Equity Markets Send Mixed Signals for Wednesday

On Tuesday, September 10, the US equity markets had a mixed session. The Nasdaq Composite Index and the S&P 500 advanced by 0.84% and 0.45%, respectively, while the Dow declined by 0.23%.

Bank stocks weighed on the Dow as investors awaited the Harris-Trump Presidential Debate and Wednesday’s looming US CPI Report. Concerns about bank earnings left bank stocks in negative territory.

US Presidential Debate: Trump vs. Harris

According to FICC Investor CN Wire, the Presidential Election Debate impacted the betting odds for the US Presidential Election. Polymarket showed equal odds for Trump and Harris to win the election. However, the odds for a Harris win increased by 3%, while Trump’s dropped by 3% during the debate.

US CPI Report to Influence Fed Policy and Risk Sentiment

On Wednesday, the US CPI Report will likely influence the Fed rate path.

Economists predict the annual inflation rate will fall from 2.9% in July to 2.6% in August. Softer-than-expected inflation figures could fuel expectations of a 50-basis point September Fed rate cut, possibly boosting demand for riskier assets. Lower borrowing costs could drive demand for riskier assets as investors search for higher earnings.

USD/JPY Slide Raises Fear of a Yen Carry Trade Unwind

On Wednesday, the USD/JPY slid through the August 5 low of 141.684 to a session low of 141.495. The August 5 low was a pivotal moment for the global equity markets, which sank amidst the Yen carry trade unwind.

Thomas Thornton, hedge fund manager at Hedge Fund Telemetry commented on the strengthening Yen, saying,

“Yen strengthening tonight. I’m sorta concerned about this.”

Notably, fears of another Yen carry trade unwind likely spooked investors, contributing to a negative morning session.

Bank of Japan Board Member Junko Nakagawa spoke on Wednesday morning, driving Yen demand, reportedly saying,

“Given real interest rates are currently very low, we will adjust the degree of monetary support, from the standpoint of sustainably and stably achieving our 2% inflation target, if our economic and price forecasts are met.”

Expectations of further BoJ rate hikes and speculation about multiple 2024 Fed rate cuts would pressure the USD/JPY further, with sub-140 levels in sight.

Hang Seng Index and Mainland China Markets Struggle

The Hang Seng Index was down 1.53% on Wednesday morning. Yen strength and concerns about the US Presidential Debate’s implications for Chinese EV imports weighed. The Democrats have targeted China with tariffs.

The Hang Seng Mainland Properties Index was down 1.67%, while the Hang Seng Tech Index (HSTECH) fell by 0.89%. Notable movers included Alibaba (9988), which slid by 1.16%, while Baidu (9888) and Tencent (0700) were down 0.94% and 0.54%, respectively.

Meanwhile, the Mainland China markets also suffered losses. The CSI 300 and the Shanghai Composite saw declines of 0.20% and 0.78%, respectively. Concerns about the Chinese economy and lack of fiscal policy measures remained headwinds.

Nikkei Index Slides on USD/JPY Tumble to 141

The Nikkei Index was down 0.81% on Wednesday morning, with the weaker USD/JPY reducing demand for Nikkei Index-listed export stocks.

Nissan Motor Corp. (7201) slid by 2.76%, while Fast Retailing Co. Ltd. (9983) was down by 1.58%. However, tech stocks limited the downside for the Nikkei, with Tokyo Electron Ltd. (8035) and Softbank Group Corp. (9984) advancing by 0.97% and 1.01%, respectively.

ASX 200 Suffers Amid Risk-off Sentiment

The ASX 200 Index fell by 0.29% on Wednesday morning. Bank, oil, gold, and tech-related stocks contributed to the losses.

Woodside Energy Group Ltd slid by 1.98% after the pullback in crude oil prices on Tuesday. Overnight losses across the US banking sector impacted demand for Aussie bank stocks. The S&P/ASX All Technology Index also struggled, declining by 1.37%.

Investors should remain alert, with central bank commentary pivotal as the US Jobs Report looms. 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.