Hang Seng Index, ASX 200, Nikkei 225: HSI Steady on Caixin Manufacturing PMI

US Equity Markets Slide on Sticky US Inflation

The US equity markets ended June on a low note. The Nasdaq Composite Index slid by 0.71%, while the Dow and the S&P 500 declined by 0.12% and 0.41%, respectively.

The US Personal Income and Outlays Report affected buyer demand for riskier assets. In June, the Core PCE Price Index increased 2.6% after a rise of 2.8% in May. However, personal income and spending trended higher, suggesting a sticky inflation environment.

Arch Capital Global Chief Economist Parker Ross reacted to the inflation numbers, stating,

“The breadth of the disinflation was widespread and this is certainly a step in the right direction for the Fed to potentially cut in September. Services remains the sticking point, with healthcare and housing still the biggest contributors.”

While sentiment toward the Fed rate path needs consideration, economic data from China will impact market risk appetite.

Will Private Sector PMIs from China Send a Demand Warning?

On Monday, July 1, the influential China Caixin Manufacturing PMI eased fears of an economic slowdown in China. The Caixin Manufacturing PMI increased from 51.7 in May to 51.8 in June. Economists forecast a decline to 51.2.

According to the June survey,

• Production increased at the most marked pace in two years.
• Overseas and domestic new orders continued to rise, albeit at a less marked pace than in May.
• Input prices increased because of higher transport costs and upward trends in raw material prices.
• Manufacturers increased factory gate prices for the first time in six months.

Caixin Insight Group Senior Economist Dr. Wang Zhe commented on the June survey, saying,

“Recent macroeconomic data show that the economy continues to recover with stable production, demand, employment, and prices, as well as strong exports. The Caixin Manufacturing PMI has been in expansionary territory for eight consecutive months. Despite this, insufficient market confidence and effective demand remain key challenges. Looking ahead, policy support requires further consolidation.”

Considering the ongoing economic recovery, will the Chinese government deliver a meaningful stimulus package?

Hang Seng Index and China Mainland Stocks See Mixed Fortunes

Meanwhile, the Hang Seng Index was up 0.01% on Monday morning. The better-than-expected Caixin Manufacturing PMI countered weaker NBS-based PMI numbers from the weekend and uncertainty about the Fed rate path.

Nevertheless, real estate and tech stocks limited the upside. The Hang Seng Mainland Properties (HSMPI) and the Hang Seng Tech (HSTECH) Indexes were down 0.80% and 0.96%, respectively.

Baidu (9888) and Alibaba (9988) slid by 0.99% and 1.47%, respectively, tracking the Friday Nasdaq losses.

From Mainland China, the Shenzhen Composite and CSI 300 were down 0.39% and 0.28%, respectively.

Will progress toward the EU dropping tariffs on electric vehicle imports from China shift sentiment toward Mainland China stocks?

Nikkei Makes Early Gains Despite Lingering Intervention Risks

The Nikkei Index gained by 0.30% on Monday morning, with a stronger USD/JPY supporting buyer demand for export stocks. Weaker-than-expected manufacturing PMI numbers from Japan influenced early USD/JPY price trends. The Jibun Bank Manufacturing PMI fell from 50.4 to 50.0 in June, testing investor bets on a July Bank of Japan rate hike.

Leading main components like Softbank Group Corp (9984) and KDDI Corp. (9433) rallied 1.20% and 2.30%, respectively.

Later in the session on Monday, consumer confidence numbers from Japan may influence buyer demand for the Yen and Nikkei-listed stocks.

Economists forecast the Consumer Confidence Index to increase from 36.2 to 36.5 in June. Upward trends in consumer confidence could fuel consumer spending and demand-driven inflation. A more hawkish Bank of Japan rate path to ensure price stability may support a stronger Yen.

Will the Bank of Japan or the Japanese government attempt to bolster the Yen on Monday?

ASX 200 Tracks the US Markets into Negative Territory

The ASX 200 declined by 0.38% on Monday morning. Gold and tech stocks contributed to the losses. The S&P/ASX All Technology Index was down 1.40%, tracking Nasdaq losses from Friday.

Gold-related stocks Evolution Mining Ltd (EVN) and Northern Star Resources Ltd. (NST) slid by 2.00% and 1.04%, respectively. Gold-spot ended Friday down 0.04% while being flat in the Monday morning session.

In conclusion, economic indicators from China provided some market relief. However, uncertainty about the Fed rate path and progress toward dropping EU tariffs on EV car imports from China remained headwinds.