Hang Seng Index, ASX 200, Nikkei 225: US Economic Fears Sink Asian Markets

Nasdaq Slumps as US Hard Landing Fears Reignite

On Thursday, August 1, the US equity markets kickstarted August with significant losses. The Nasdaq Composite Index tumbled 2.30%, while the Dow and the S&P 500 declined by 1.21% and 1.37%, respectively.

10-year US Treasury yields slid by 55 basis points to 3.978% amidst concerns about the US economy and geopolitical tensions in the Middle East. Fears of a Middle East conflict intensified in recent sessions.

US Economic Indicators Flash Red

US continuing jobless claims jumped from 1,844k in the week ending July 13 to 1,877k in the week ending July 20. The larger-than-expected rise in claims retriggered fears of a hard US landing.

US Labor Market and Consumer Spending

A deterioration in US labor market conditions could affect wage growth and reduce disposable income. Furthermore, downward trends in disposable income may impact consumer spending and the US economy. Private consumption contributes over 60% to the US economy.

The US ISM Manufacturing PMI sent a warning signal, falling from 48.5 in June to 46.8 in July.

Expert Commentary

Arch Capital Global Chief Economist Parker Ross commented on the US labor market data, saying,

“With the latest data in hand, both initial and continuing claims remained in the gradual uptrend they have been in since the beginning of the year, although the latest weekly data showed a notable step higher above the recent non-COVID norm.”

Parker Ross listed contributory factors requiring consideration but emphasized,

“Regardless, the continued/renewed uptrend has not been driven by those factors alone and warrants watching.”

Bank of Japan Pivot Sends the Nikkei into Free Fall

The Nikkei Index slumped for the second session as Wednesday’s Bank of Japan monetary policy decision resonated. On Wednesday, the Bank of Japan unexpectedly raised interest rates and cut Japanese Government Bond (JGB) purchases. Bank of Japan Governor Kazuo Ueda signaled more rate hikes, driving Yen demand.

On Thursday, August 1, the USD/JPY followed Wednesday’s 1.83% loss with a 0.42% decline to end the session at 149.328.

A stronger Japanese Yen impacts buyer demand for Nikkei Index-listed export stocks.

Hang Seng and Mainland China Markets See Red

Meanwhile, the Hang Seng Index slid by 1.76% on Friday morning. Tech stocks and real estate stocks contributed to the morning losses.

The Hang Seng Tech (HSTECH) Index declined by 1.71%. Alibaba (9988) and Baidu (9888) slid by 1.48% and 2.56%, respectively, while Tencent (0700) fell by 0.68%.

The Hang Seng Mainland Properties Index (HSMPI) was down 1.02%.

Mainland China’s equity markets extended their losses from Thursday on concerns about the Chinese economy. The CSI 300 and the Shanghai Composite Index both fell by 0.10%.

Nikkei Index Tumbles on BoJ Policy Shift

The Nikkei Index was down 4.05% on Friday morning, with losses broad-based. Tokyo Electron Ltd. (8035) was among the worst performers, tumbling by 9.66%, while Softbank Group Corp. (9984) slid by 5.90%. Sony Corp. (6758) was down 4.89%.

ASX 200 Tracks the US Equity Markets South

The ASX 200 Index slid by 2.04% on Friday morning. The losses were broad-based, with Gold, mining, oil, and tech stocks contributing. The S&P ASX All Technology Index (XTX) tracked the Nasdaq into the red, falling by 1.51%. Additionally, growth fears sent mining and oil stocks deep into negative territory.

Mining giants BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) were down by 1.93% and 2.91%, respectively. Woodside Energy Group Ltd (WDS) fell by 2.11%.

Investors should remain alert amidst economic growth fears and geopolitical tensions. Closely monitor the news wires, real-time data, and expert commentary to manage trading strategies accordingly. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.