Hang Seng Index, ASX 200, Nikkei 225: Japanese Economy in Focus

Highlights

• The Asian equity markets enjoyed a post-holiday rally, with the Hang Seng Index leading the ASX 200 and the Nikkei into positive territory.
• Gains across the US equity markets on Tuesday and industrial profit numbers from China drove demand for riskier assets.
• On Thursday, economic indicators from Japan and overnight US economic indicators from Wednesday need consideration.

Overview of the Wednesday Session

On Wednesday, the Hang Seng Index led the ASX 200 and the Nikkei into positive territory. The Australian and Hong Kong markets had the first opportunity to respond to softer US inflation numbers from Friday.

However, overnight US economic indicators from Tuesday and a positive US equity market session contributed to the Wednesday gains. The Dallas Fed Manufacturing Index unexpectedly rose in December, fueling bets on a soft landing.

On Tuesday, the Nasdaq Composite Index gained 0.54%, with the Dow and the S&P 500 ending the day up 0.43% and 0.42%, respectively.

Economic indicators from China supported the buyer demand for riskier assets. Industrial profits were up 29.5% year-over-year in November. The upswing ended a sequence of softer year-over-year figures. Industrial profits increased by 2.7% in October, 11.9% in September, and 17.2% in August.

US Private Sector to Set the Tone

On Thursday, overnight US economic indicators from Wednesday will set the tone for the Asian session. The US private sector was in focus. Better-than-expected Dallas Fed Services numbers supported the market bets on a soft landing. However, Richmond Fed Manufacturing and Services numbers painted a different picture, limiting the upside for the US equity markets.

The US equity markets responded to the December numbers. On Wednesday, the Dow and S&P 500 gained 0.30% and 0.14%, with the Nasdaq Composite Index ending the day up 0.16%.

Economic Indicators from Japan to Put the Bank of Japan in the Spotlight

On Thursday, investors must also consider the Asian economic calendar and likely influences on central banks.

The Japanese economy will be in focus. Retail sales and industrial production figures warrant investor attention. A larger-than-expected increase in retail sales could fuel speculation about a Bank of Japan pivot from negative rates. However, weak industrial production numbers could give the BoJ reason to delay a policy move away from ultra-loose.

Economists forecast industrial production to decline by 1.6%. However, economists expect retail sales to increase by 5.0% year-over-year vs. 4.2% in October.

In the futures markets, the ASX 200 was up 28 points while the Nikkei declined by 150 points. A weaker USD/JPY could test demand for export-listed Nikkei stocks.

ASX 200

The ASX 200 gained 0.80% on Wednesday. Tech stocks contributed to the gains. The S&P ASX All Technology Index (XTX) rallied 1.07%. However, gains were broad-based, with gold, oil, mining, and bank stocks enjoying a positive session.

Gold (XAU/USD) stocks: Evolution Mining Ltd. (EVN) and Northern Star Resources Ltd. (NST) ended the day up 1.28% and 0.44%, respectively. Oil stocks: Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) saw gains of 0.64% and 0.92%, respectively.

BHP Group Ltd (BHP) rallied 1.07%, with Fortescue Metals Group Ltd. (FMG) and Rio Tinto Ltd. (RIO) rising by 0.71% and 0.54%, respectively.

The big four banks trailed the front-runners. Commonwealth Bank of Australia (CBA) and National Australia Bank Ltd. (NAB) ended the day up 0.62% and 0.39%, respectively. ANZ Group Holdings Ltd (ANZ) and Westpac Banking Corp. (WBC) gained 0.08% and 0.18%, respectively.

Hang Seng Index

The Hang Seng Index rallied 1.74% on Wednesday. The Hang Seng Tech Index (HSTECH) gained 2.58%. However, the Hang Seng Mainland Properties Index (HSMPI) declined by 0.52%.

Alibaba (9988) and Tencent (0700) ended Wednesday up 2.71% and 4.01%, respectively. NetEase (9999) rallied 11.89% as investors responded to Beijing adjusting its stance on gaming.

Bank stocks also had a positive session. HSBC (0005) rose by 1.21%. China Construction Bank (0939) and Industrial Commercial Bank (1398) saw gains of 1.11% and 1.63%, respectively.

The Nikkei 225

(Graph for reference purposes only)

The Nikkei rallied 1.13% on Wednesday.

Bank stocks ended Wednesday in positive territory. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) rose by 0.87% and 0.17%, respectively. It was also a positive session for the main components of the Nikkei.

Softbank Group Corp. (9948) rallied 4.39%. Investors responded to news it would receive shares in T-Mobile US worth $7.59 billion.

Tokyo Electron Ltd. (8035) and Sony Group Corp. (6758) saw gains of 1.32% and 1.33%, respectively.

KDDI Corp. (9433) and Fast Retailing Co. Ltd. (9983) ended the day up 0.83% and 0.36%, respectively.

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