Hang Seng Index, ASX 200, Nikkei 225 Index: China PMIs in Focus

Key Insights:

• Mixed Asian markets: ASX200 and the Nikkei rise, while Hang Seng slips on Wednesday.
• Positive US session, yet China’s NBS Manufacturing, Non-Manufacturing PMIs to test investor appetite.
• Rising US Core PCE Price Index, personal spending may refuel hawkish Fed bets, and impact global markets.

Wednesday Overview

It was a mixed session for the Asian equity markets on Wednesday. The ASX200 and Nikkei ended the session in the green, while the Hang Seng Index slipped into the red.

Investors responded to US economic indicators from Tuesday. US consumer confidence and JOLTs job opening numbers eased bets on further Fed interest rate hikes. The CB Consumer Confidence Index fell from 114.0 to 106.1 in August. Significantly, JOLTs job openings tumbled from 9.165 million to 8.827 million in July.

Easing bets on further Fed rate hikes drove demand for riskier assets. The NASDAQ rallied 1.74% on Tuesday, with the S&P 500 and the Dow ending the day up 1.45% and 0.85%, respectively.

ADP Nonfarm Gives the Fed More Reason to Hit the Brakes

US economic indicators from Wednesday provided the Fed with more reasons to hit the brakes on interest rate hikes. The ADP reported a 177k increase in nonfarm employment versus 371k in July. Investors also responded to downward revisions to second-quarter GDP estimates. The US economy expanded by 2.1% in the second quarter, down from a first estimate of 2.4%.

On Wednesday, the S&P 500 and the NASDAQ Composite Index gained 0.38% and 0.54%, respectively. The Dow rose by 0.11%.

The ADP numbers and positive US session should support riskier assets this morning.

China Private Sector PMIs to Test Investor Appetite

While the positive US session will provide support, we expect the economic calendar to influence this morning. Industrial production numbers from Japan and private new CAPEX figures from Japan will need consideration.

However, the China NBS Manufacturing and Non-Manufacturing PMI numbers will be the focal point. A deeper contraction across the manufacturing sector and a contraction across the services sector would weigh on riskier assets.

Economists forecast the NBS Manufacturing PMI to increase from 49.3 to 49.5 in August. Economists expect service sector activity to continue expanding, with a modest decline from 51.5 to 51.1.

This morning, the futures markets signal a bullish open for the ASX 200 and the Nikkei.

Caution Ahead of US Inflation and Spending Numbers?

After a positive first half of the week, investor caution may impact buyer appetite this morning. US Core PCE Price Index and personal spending figures could refuel bets on a hawkish Fed. Economists forecast the Core PCE Price Index to increase by 4.2% in July versus 4.1% in June.

Consumption will also be a consideration. Economists expect personal spending to rise by 0.6% in July versus 0.5% in June.

Larger-than-expected increases could leave the US Jobs Report to decide the outcome of the September FOMC meeting.

Considering the influence of the Fed on the global equity markets, investors may lock in profits and await the numbers.

ASX 200

The ASX 200 extended its winning streak to three sessions, gaining 1.21%. Softer inflation figures eased hawkish RBA bets. The Monthly Consumer Price Index (CPI) Indicator increased by 4.9% in July, softening from 5.4% in June. Economists forecast an annual inflation rate of 5.2%.

The National Australia Bank (NAB) and ANZ Group (ANZ) saw gains of 1.55% and 0.97%, respectively. Westpac Banking Corp (WBC) and The Commonwealth Bank of Australia (CBA) ended the day up 0.79% and 0.80%, respectively.

Mining stocks also had a bullish session. Rio Tinto (RIO) and BHP Group Ltd (BHP) gained 2.14% and 1.45%, respectively, with Newcrest Mining (NCM) ending the day up 1.63%. However, Fortescue Metals Group (FMG) led the way for a second session, surging 4.49%.

After easing hawkish bets on the RBA, PMI numbers from China could test the buoyant sentiment.

Oil stocks joined the broader market in positive territory. Woodside Energy Group (WDS) and Santos Ltd (STO) rose by 0.76% and 1.31%, respectively.

Hang Seng Index

The Hang Seng Index bucked the broader market trend, falling by 0.01%. US-China tensions weighed on the Hang Seng Index, which coughed up early session gains.

The main Index components weighed. Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) saw losses of 1.09% and 0.61%, respectively.

Bank stocks had another mixed session. The Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) fell by 0.56% and 0.24%, respectively. HSBC Holdings PLC bucked the trend, gaining 1.45%.

Nikkei 225

(For reference purposes only)

The Nikkei 225 gained 0.33% as investors responded to the US economic indicators from Tuesday. A larger-than-expected fall in household confidence will leave the BoJ in ultra-loose mode for longer, a positive scenario.

The household confidence index fell from 37.1 to 36.2 in August. Economists forecast an increase to 37.5. On Friday, BoJ Governor Ueda discussed the need for a pickup in wage growth and demand-driven inflation to move from ultra-loose. The weaker household confidence numbers suggest lackluster demand.

Bank stocks Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group ended the day up 1.34% and 1.04%, respectively.

Tokyo Electron Limited (8035) and Sony Corp. (6758) rose by 0.97% and 0.71%, respectively, with KDDI Corp. (9433) up 0.56%.

However, Fast Retailing Co (9983) and SoftBank Group Corp. (9984) ended the session down 0.18% and 0.47%, respectively.

Check out our economic calendar for economic events.