Hang Seng Index, ASX 200, Nikkei 225: HSI Up on China Policy Hopes

On Wednesday, July 10, investors reacted to overnight testimony from Fed Chair Powell.

US Equity Markets: Fed Chair Powell Cagey Before the US CPI Report

The US Federal Reserve and Fed Chair Powell were in the spotlight on Tuesday, July 9. During his testimony on Capitol Hill, Powell spoke positively about the US economy’s progress toward the Fed’s 2% inflation target. He also noted softening labor market conditions. While Powell did not offer a timeline, he indicated that an interest rate cut is more likely than a rate hike.

The testimony came before the crucial US CPI Report due Thursday, July 11.

Arch Capital Global Chief Economist Ross Parker reacted to the testimony, saying,

“The Fed has finally explicitly acknowledged that the risks to price stability and maximum employment have come much more into balance. They now need to manage both of those risks, not solely inflation. […]. This is what I’ve been waiting to hear from Powell for some time now and means they’re teeing up the first rate cut – which still isn’t likely to happen until Sept.”

According to the CME FedWatch Tool, the chances of a September Fed rate cut fell modestly from 75.6% to 73.3% on Tuesday.

The US equity markets had a mixed Tuesday session, with Powell not committing to a September Fed rate cut. The Nasdaq Composite Index and the S&P 500 gained 0.14% and 0.07%, respectively, while the Dow declined by 0.13%.

Fed Chair Powell’s testimony set the tone for the Wednesday Asian session, while inflation figures from China were also in focus.

China Inflation Softens in June

According to the National Bureau of Statistics (NBS), China’s annual inflation rate softened from 0.3% in May to 0.2% in June.

However, producer price trends suggested a possible pickup in demand. Producer prices declined 0.8% in June year-on-year after a 1.4% fall in May. Producers increase prices in a rising demand environment, passing costs onto consumers.

Will the weak CPI numbers pressure Beijing to introduce fresh policy measures to bolster the Chinese economy?

Hang Seng Index Gains on Policy Hopes

Meanwhile, the Hang Seng Index rose by 0.81% on Wednesday morning. Softer-than-expected consumer price figures from China raised hopes for further policy measures to bolster demand and the economy. The government may introduce measures at the Communist Party of China Third Plenum next week.

Tech stocks contributed to the gains, with the Hang Seng Tech (HSTECH) Index rallying 1.70%.

Baidu (9888) surged by 10.20%. Investors likely responded to news of the deployment of ApolloGo driverless cabs from Baidu. Alibaba (9988) and Tencent (0700) advanced by 2.00% and 1.19%, respectively.

Mainland China equity markets extended their gains from Tuesday. The Shenzhen Composite and CSI 300 were up by 0.50% and 0.09%, respectively.

Nikkei Sees Morning Gains on Yen Weakness

The Nikkei Index advanced by 0.10% on Wednesday morning as the USD/JPY extended its gains from Tuesday. The USD/JPY climbed to a morning high of 161.592, boosting buyer demand for Nikkei-listed export stocks.

Sony Group Corporation (6758) rallied 1.51%, while Softbank Group Corp (9984) gained 0.85%

ASX 200 Falls as Mining Stocks Retreat

The ASX 200 Index fell by 0.48% on Wednesday morning, bucking the positive trend in the Asian equity markets. Iron ore spot prices declined by 0.93% on Tuesday. The pullback in iron ore prices dragged mining stocks into negative territory.

Mining giants BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) saw losses of 1.14% and 0.39%, respectively. Fortescue Metals Group Ltd. (FMG) was down 0.94%.

With crucial data releases this week, investors should remain alert. Monitor the news wires, real-time data, and expert commentary to manage trading strategies accordingly. Stay informed with our latest updates and insights to navigate the Asian equity markets effectively.