Hang Seng Index, ASX 200, Nikkei 225: Fed Rate Path Uncertainty and China in Focus

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Updated: Feb 18, 2024, 23:32 GMT+00:00

Key Points:

The Hang Seng Index led the Nikkei and ASX 200 into positive territory on Friday.
On Monday, US producer prices from Friday and losses across the US equity markets will likely set the tone for the session.
Economic indicators from Japan, stimulus chatter from Beijing, and central bank commentary will need consideration.

Overview of the Friday Session

On Friday, the Hang Seng Index continued enjoying a positive start to the Year of the Dragon, extending its winning streak to three sessions. The ASX 200 and Nikkei 225 also ended the day in positive territory.

US economic indicators from Thursday influenced investor bets on Fed rate hikes. Retail sales fell by more than expected in January.

10-year US Treasury yields fell by 0.54%, ending the session at 4.236%. The US equity markets reacted to the US retail sales figures. On Thursday, the Nasdaq Composite Index ended the session up 0.30%. The S&P 500 and the Dow saw gains of 0.58% and 0.91%, respectively.

On Friday, there were no Asian economic indicators to affect market risk sentiment. However, investors reacted to media reports from China about travel numbers during the Chinese New Year holidays. A pickup in demand would be a boon for the regional markets.

Bank of Japan Governor Kazuo Ueda contributed to a softer Yen and demand for Nikkei export-listed stocks. Governor Ueda said monetary policy would remain accommodative.

US Producer Prices, HK Earnings, and Central Banks

On Monday, US producer prices from Friday could test buyer demand for riskier assets. Producer prices increased by more than expected in January. Producer prices increased by 0.3%, with core producer prices up 0.6%. Economists forecast producer and core producer prices to increase by 0.1% after falling by 0.1% in December. 10-year US Treasury yields climbed 1.11% to 4.283%.

The US equity markets also reacted to the numbers, with the Nasdaq Composite Index falling 0.82%. On Friday, the Dow and S&P 500 ended the session down 0.37% and 0.48%, respectively.

However, investors must consider the Asian economic calendar. Machinery orders from Japan could influence the timeline for a Bank of Japan pivot from negative rates. Economists forecast machinery orders to increase by 2.5% in December. Machinery orders slid by 4.9% in November.

Beyond the economic calendar, positive reports from China on spending during Chinese New Year could fuel demand for riskier assets.

HK corporate earnings could also move the dial. Sands China (HK: 1928) released earnings after the closing bell on Friday. A surge in reported sales could fuel demand for Hang Seng-listed stocks.

On Monday, Westpac Banking Corp. (ASX), BHP Group (ASX), and Lend Lease Group (ASX) will release earnings reports.

However, central bank commentary and stimulus chatter from Beijing also need consideration.

On Monday, the ASX 200 and Nikkei futures were up 13 and 170 points, respectively.

ASX 200

ASX200 190224 Daily Chart

The ASX 200 rose by 0.69% on Friday. Gains were broad-based, with gold, oil, mining, and bank stocks contributing to the gains. Tech stocks also ended the session in positive territory. The S&P ASX All Technology Index (XTX) gained 0.61%.

Gold (XAU/USD) stocks led the way, with Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. rallying 3.05% and 2.01%, respectively. Oil stocks Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) gained 1.52% and 0.55%, respectively.

The Commonwealth Bank of Australia (CBA) led the big four banks, rising by 1.86%. ANZ Group Holdings Ltd (ANZ) and Westpac Banking Corp. (WBC) ended the day up 0.71% and 0.82%, respectively. National Australia Bank Ltd. (NAB) rose by 0.67%.

Despite concerns about BHP Group Ltd (BHP) and warnings about writedowns, mining stocks also had a positive session. BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) ended the session up 0.97% and 1.23%, respectively. Fortescue Metals Group Ltd. (FMG) gained 1.14%.

Hang Seng Index

Hang Seng continued Year of the Dragon rally.

HSI 190224 Daily Chart

On Friday, the Hang Seng Index rallied 2.48%. Real estate and tech stocks contributed to the gains. The Hang Seng Mainland Properties Index (HSMPI) surged 6.76%. The Hang Seng Tech Index (HSTECH) ended the day up 3.71%.

Alibaba (9988) and Tencent (0700) saw gains of 2.38% and 2.24%, respectively.

Bank stocks also had a positive session. HSBC (0005) rose by 0.98%. China Construction Bank (0939) and Industrial Commercial Bank (1398) ended the day up 0.64% and 1.03%, respectively.

The Nikkei 225

Nikkei moved closer to the December 1989 all-time high.

Nikkei 190224 Daily Chart

(Graph for reference purposes only)

The Nikkei ended the Friday session up 0.86%.

Bank stocks enjoyed a positive end to the week. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) rallied 3.20% and 2.71%, respectively.

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

KDDI Corp. (9433) and Fast Retailing Co. Ltd. ended the day up 1.64% and 1.08%, respectively. Tokyo Electron Ltd. (8035) gained 0.40%.

Softbank Group Corp. (9948) and Sony Group Corp. (6758) ended the session down 2.20% and 1.71%, respectively.

For upcoming economic events, refer to our economic calendar.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.