Hang Seng Index, ASX 200, Nikkei 225: China Trade Data and RBA Decision in Focus

Highlights

• The Nikkei 225 led the Hang Seng Index and the ASX 200 into positive territory on Monday.
• Investors reacted to the US Jobs Report and bets on the Fed ending its rate hike cycle.
• On Tuesday, China trade data, the RBA, and key economic indicators from Japan will be in focus.

Overview of the Monday Session

On Monday, the Nikkei 225 outperformed the Hang Seng Index and the ASX 200, leading them into positive territory. Investors reacted to US economic indicators from Friday and Fed interest rate expectations.

The US Jobs Report and ISM Services PMI survey from Friday fueled bets on the Fed ending its rate hike cycle. Significantly, weaker economic data also increased the likelihood of a Fed rate cut in the first half of 2024.

On Friday, the US equity markets responded to the stats and the shift in sentiment toward the Fed interest rate outlook. The Nasdaq Composite Index rallied 1.38%, with the S&P 500 and the Dow gaining 0.94% and 0.66%, respectively.

The Asian economic calendar had little influence on the markets. However, Bank of Japan Governor Kazuo Ueda spoke about the need for ultra-loose to navigate an uncertain economic outlook. The BoJ Governor also highlighted progress toward hitting the 2% inflation target. The commitment to ultra-loose contributed to the gains for the Nikkei 225.

China Trade and the RBA in the Spotlight

There were no US economic indicators from Monday to influence market risk sentiment on Tuesday. FOMC voting member Lisa Cook held back from offering her views on interest rates, leaving the US equity markets relatively flat on Monday.

On Monday, the Nasdaq Composite Index gained 0.30%, with the Dow and S&P 500 rising 0.10% and 0.18%. 10-year US Treasury yields rose by 1.64%, pegging the markets back from another upbeat session. While the tentative US session will influence the Asian markets, the Asian economic calendar will likely impact more.

On Tuesday, trade data from China and the RBA interest rate decision will garner investor interest. The trade figures will influence the ASX 200, Hang Seng Index, and the Nikkei 225. Economists forecast imports and exports to fall at a more modest pace. Recent manufacturing PMI reports highlighted weak overseas demand, which may impact exports in October.

However, news of the Chinese government planning to increase imports to improve trade relations with key partners could cushion the impact of any weak figures.

For the ASX 200, the RBA interest rate decision and rate statement will influence rate-sensitive stocks. Economists expect the RBA to raise the Cash Rate by 25 basis points to 4.35%. Unless there is a surprise decision to hold interest rates, the focus will be on the rate statement.

For the Nikkei 225 and the Bank of Japan, wage growth and household spending will be in the spotlight. Another slide in spending and lackluster wage growth would support the Bank of Japan’s commitment to ultra-loose monetary policy.

In the futures markets on Tuesday, the ASX 200 and Nikkei were down 11 and 70 points, respectively.

ASX 200

The ASX 200 rose by 0.27% on Monday.

Westpac Banking Corp. (WBC) rallied 1.95% on higher annual profits, a larger dividend payout, and share buyback plans. The National Australia Bank Ltd. (NAB) gained 0.96%, with the Commonwealth Bank of Australia (CBA) and ANZ Group Holdings Ltd. (ANZ) rising by 0.49% and 0.55%, respectively. ANZ and NAB will also release earnings this week.

Mining and oil stocks ended the day in negative territory. BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) fell by 0.13% and 0.90%, respectively. Fortescue Metals Group Ltd. (FMG) slipped by 0.04%.

Woodside Energy Group Ltd. (WDS) and Santos Ltd. (STO) saw losses of 0.76% and 0.40%, respectively.

Gold stocks found further support on Monday. Evolution Mining Ltd. (EVN) and Northern Star Resources Ltd. (NST) ended the day up 5.13% and 3.18%, respectively. However, Gold Spot ended Monday in negative territory, suggesting a reversal on Tuesday.

Hang Seng Index

The Hang Seng Index gained 1.71% on Monday. Chinese government pledges to boost imports to improve relations with trading partners drove demand for HSI-listed stocks.

Alibaba (9988) and Tencent (0700) gained 2.41% and 3.30%, respectively.

Bank stocks had a mixed Monday session. HSBC (0005) and China Construction Bank (0939) rose by 0.60% and 0.22%. Industrial and Commercial Bank (1398) declined by 0.52%.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei 225 surged by 2.37% on Monday, the Index also playing catch up after the Friday market close.

Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group (8306) declined by 1.95% and 1.89%.

KIDDI Corp. (9433) jumped by 4.87%. Tokyo Electron (8035) and Softbank (9984) ended the day up 2.14% and 2.05%, respectively. Fast Retailing (9983) and Sony Corp gained 1.58% and 1.83%, respectively.

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