Hang Seng Index, ASX 200, Nikkei Index: China Policy and a Hang Seng 4-Week Streak

US Equity Markets: The Fed and Rate Cut Bets

On Friday (May 17), FOMC member speeches warranted investor interest. Hawkish Fed comments from Thursday impacted market risk sentiment going into the Friday session.

FOMC member Michelle Bowman echoed comments from FOMC members Raphael Bostic and Loretta Mester, calling for a higher-for-longer Fed rate path. The Fed Governor also reiterated a willingness to hike rates if needed.

Despite moderately softer inflation figures for April, the US labor market remains tight, supporting wage growth and consumer spending.

The US equity markets reacted to the FOMC member speeches. On Friday, the Nasdaq Composite Index slipped by 0.07%. However, the Dow and S&P 500 saw gains of 0.34% and 0.12%, respectively.

US equity market trends from Friday will set the tone for the Monday (May 20) Asian session.

Asian Economic Calendar: The PBoC

On Monday (May 20), the People’s Bank of China (PBoC) will be in focus, with China’s central bank setting the loan prime rates (LPR). Economists expect the PBoC to leave the 1-year and 5-year LPRs unchanged at 3.45% and 3.95%, respectively. After the mixed economic data from China, a surprise rate cut could drive buyer demand for ASX 200 and Hang Seng Index-listed stocks.

Later in the Asian session, economic indicators from Japan could influence buyer demand for Nikkei Index-listed stocks. Tertiary Industry Index figures for March will garner investor interest. Economists forecast the Index to increase by 0.1% after rising by 1.5% in February. Weaker-than-expected numbers could paint a more grim picture of the Japanese economy in Q1 2024.

Furthermore, investors should monitor Bank of Japan comments on the economy, inflation, and interest rates. Dovish chatter could impact buyer demand for the Japanese Yen. A weaker Yen would support buyer appetite for Nikkei Index-listed export stocks.

Commodities: Crude Oil, Gold, and Iron Ore

On Friday (May 17), gold spot (XAU/USD) rallied 1.61% to close the session at $2,415.22. WTI crude oil gained 0.83%, ending the day at $80.06.

On the Singapore Futures Exchange, iron ore prices were up 0.03% on Monday (May 20). Iron ore spot advanced by 0.49% on Friday.

The USD/JPY and the Nikkei

The USD/JPY rose by 0.16% on Friday (May 17), ending the session at 155.640. The stronger USD/JPY leaves the Yen and the Nikkei Index exposed to intervention risk.

The Futures Markets

On Monday (May 20), the ASX 200 was up 35 points while the Nikkei Index was down by 30 points.

ASX 200

The ASX 200 declined by 0.85% on Friday (May 17). Bank, gold, oil, and Tech stocks contributed to the losses. The S&P/ASX All Tech Index tumbled 2.07%.

Gold-related stocks Northern Star Resources Ltd. (NST) and Evolution Mining Ltd (EVN) slid by 1.67% and 1.78%, respectively.

Commonwealth Bank of Australia (CBA) declined by 1.00%. ANZ Group Holdings Ltd. (ANZ) and National Australia Bank Ltd. (NAB) saw losses of 0.46% and 0.09%, respectively. Westpac Banking Corp. (WBC) bucked the trend, advancing by 0.15%.

Oil stocks Woodside Energy Group Ltd (WDS) and Santos Ltd (STO) fell by 1.47% and 1.69%, respectively.

However, mining stocks limited the losses.

BHP Group Ltd (BHP) and Rio Tinto Group Ltd. (RIO) saw gains of 0.79% and 1.35%, respectively. Fortescue Metals Group Ltd. (FMG) rose by 1.24%.

Hang Seng Index

The Hang Seng Index gained 0.91% on Friday (May 17). Significantly, the Hang Seng extended its winning streak to four weeks.

Property stocks surged for a second consecutive session, with the Hang Seng Mainland Properties Index (HSMPI) jumping 5.31%. Investors reacted to fresh policy support measures from Beijing to bolster the real estate sector. Tech stocks contributed to the gains. The Hang Seng Tech Index (HSTECH) advanced by 0.99%.

Alibaba (9988) surged by 7.94%, rebounding from the effects of an earnings miss on Thursday. Tencent Holdings (0700) gained 0.36%.

JD.com (HK: 9618) and Baidu (HK: 9888) saw gains of 1.28% and 2.31%, respectively, on better-than-expected earnings results.

However, bank stocks had a negative session. HSBC (0005) fell by 2.00%. China Construction Bank (0939) and Industrial Commercial Bank (1398) saw losses of 1.53% and 0.64%, respectively.

The Nikkei Index

(Graph for reference purposes only)

The Nikkei Index fell by 0.34% on Friday (May 17).

Bank stocks had a positive session. Sumitomo Mitsui Financial Group Inc. (8316) and Mitsubishi UFJ Financial Group Inc. (8306) saw gains of 3.44% and 2.04%, respectively.

However, it was a mixed session for the main components of the Nikkei Index.

Softbank Group Corp. (9984) and Sony Group Corporation (6758) advanced by 0.13% and 0.65%, respectively. KDDI Corp. (9433) ended the session up 0.28%.

Fast Retailing Co. Ltd. (9983) and Tokyo Electron Ltd. (8035) declined by 0.89% and 1.98%, respectively.

For upcoming economic events, refer to our economic calendar.