Hang Seng Index, ASX 200, Nikkei 225: China Inflation and Policy in the Spotlight

Highlights

• The Hang Seng Index and the Nikkei ended Wednesday in negative territory. The ASX 200 tracked the US equity market gains from Tuesday.
• On Thursday, overnight Fed speeches and US corporate earnings from Wednesday will set the tone.
• Inflation numbers from China, the Asian corporate earnings calendar, and central bank commentary also need consideration.

Overview of the Wednesday Session

On Wednesday, the Hang Seng Index and the Nikkei ended the session in negative territory. The ASX 200 tracked the US equity markets, closing the session in positive territory.

Overnight US economic indicators from Tuesday had a limited impact on the US equity markets. The RCM/TIPP Economic Optimism Index fell from 44.7 to 44.0 for February. Consumer sentiment toward the US economy deteriorated despite upbeat US economic indicators raising the prospect of a no-landing.

However, US corporate earnings influenced market risk sentiment. Eli Lilly (LLY) beat fourth-quarter forecasts. Fed speakers also warranted investor attention after Fed Chair Powell’s comments from Sunday.

FOMC members Neel Kashkari and Loretta Mester sent similar messages. Kashkari said he needed more confidence inflation was moving toward the target before considering cutting rates. Mester was unwilling to give a timeline for rate cuts, saying the strong labor market and consumption would allow the Fed to digest more inflation data.

10-year US Treasury yields declined by 1.39%, offering broad-based equity market support. On Tuesday, the Dow and S&P 500 ended the session up 0.37% and 0.23%, respectively. The Nasdaq Composite Index rose by 0.07%.

Economic indicators from Australia and Japan sent mixed signals. The Ai Group Industry Index declined from -22.4 to -27.3 in January. In contrast, the Japanese Leading Economic Index increased from 108.1 to 110.0 in December.

However, corporate earnings also influenced the market trends throughout the Wednesday session.

The Fed, Earnings, and China Remain the Focal Points

On Thursday, overnight Fed speeches  from Wednesday warrant investor attention. FOMC members Susan Collins, Adriana Kugler, and Thomas Barkin delivered speeches. Patience and confidence in inflation returning sustainably to target were common themes.

However, upbeat US corporate earnings offset hawkish Fed comments and concerns about the banking sector. Moody’s downgraded New York Community Bancorp Inc. (NYCB) to junk.

From the US economic calendar, Uber Technologies (UBER), CVS Health Corp. (CVS), Fox Corp. (FOX), The Walt Disney Co. (DIS), PayPal Holdings Inc. (PYPL), and Mattel Inc. (MAT) were among the big names to release earnings.

On Wednesday, the Dow gained 0.41%, with the Nasdaq Composite Index and S&P 500 ending the day up 0.95% and 0.82%, respectively.

The US equity market session will set the tone for the Thursday session. However, investors must also consider the Asian economic calendar.

Housing sector data from Australia and inflation numbers from China will garner investor attention.

Beyond the numbers, corporate earnings, stimulus chatter from Beijing, Chinese equity market interventions, and central bank commentary also need consideration.

On Thursday, the ASX 200 and the Nikkei futures were up 3 and 150 points, respectively.

ASX 200

The ASX 200 gained by 0.45% on Wednesday. Gold (XAU/USD) and mining stocks contributed to the gains, with tech stocks recovering from a Tuesday pullback. The S&P ASX All Technology Index (XTX) rose by 0.54%.

Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. ended the day up 0.23% and 1.30%, respectively.

BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) rose by 1.04% and 0.93%, respectively. Fortescue Metals Group Ltd. (FMG) ended the session up 1.00%.

Banking stocks had another mixed session. Commonwealth Bank of Australia (CBA) and Westpac Banking Corp. (WBC) saw gains of 0.16% and 0.50%, respectively. National Australia Bank Ltd. (NAB) and ANZ Group Holdings Ltd (ANZ) declined by 0.22% and 0.04%, respectively.

Oil stocks also had a mixed session. Woodside Energy Group Ltd (WDS) gained 0.53%. However, Santos Ltd (STO) slid by 5.84% on news of merger talks with Woodside Energy Group Ltd. ending.

Hang Seng Index

The Hang Seng Index declined by 0.34% on Wednesday. Real estate and tech stocks contributed to the losses. The Hang Seng Mainland Properties Index (HSMPI) and Hang Seng Tech Index (HSTECH) declined by 2.90% and 1.64%, respectively.

Alibaba (9988) ended the session down 1.45%. Alibaba shares dropped as investors reacted to a miss on fourth quarter revenue expectations. Tencent (0700) gained 0.48%.

Bank stocks also had a mixed session. HSBC (0005) rose by 0.73%. China Construction Bank (0939) and Industrial Commercial Bank (1398) ended the day down 0.84% and 0.77%, respectively.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei declined by 0.11% on Wednesday. Toyota earnings results from Tuesday cushioned the downside. Toyota Motor Corp. (7203) rallied 3.99%, supporting the broader auto sector. Mitsubishi Corp. (8058) surged 9.74%

Bank stocks ended the session in positive territory. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) rose by 0.75% and 0.32%, respectively.

However, the main components of the Nikkei had a mixed session.

KDDI Corp. (9433) fell by 1.96%. Softbank Group Corp. (9948) and Fast Retailing Co. Ltd. saw losses of 0.60% and 0.21%, respectively. Tokyo Electron Ltd. (8035) declined by 0.52%.

Sony Group Corp. (6758) bucked the trend, gaining 0.32%.

For upcoming economic events, refer to our economic calendar.