Hang Seng Index, ASX 200, Nikkei Index: Hang Seng Up on EU-China Tariff Talks

US Equity Markets Advance on Fed Rate Cut Optimism

The US equity markets ended the Thursday, June 27, session in positive territory. The Nasdaq Composite Index gained 0.30%, while the Dow and the S&P 500 advanced by 0.09% and 0.09%, respectively.

US economic indicators supported investor bets on a September Fed cut as the crucial US inflation data release loomed.

Insured unemployed levels reportedly reached their highest level since 2021, signaling a weakening US labor market.

Moreover, finalized US GDP numbers affirmed growth of 1.4% in Q1 2024, down from 3.4% in Q4 2023.

On Thursday, 10-year US Treasury yields declined by 47 basis points to 4.284%.

Arch Capital Global Chief Economist Parker Ross reacted to the jobless claims report, saying:

“Continuing claims of 1,839k (sa) surprised more meaningfully to the upside for the week ending June 15 (1,828k cons) but was just above my estimate of 1,835k. […]. Continuing claims still reflect a more substantial softening of the labor market.

Considering claims data before and after COVID, Parker Ross added,

“While it looks like there has likely been some change in the seasonality of layoffs and unemployment, there’s been deterioration no matter how you cut it (particularly for continuing claims).”

On Friday, the US futures signaled hopes of a softer US inflation print. The Dow mini and S&P 500 mini were up 5 and 16 points, respectively, while the Nasdaq mini gained 94 points.

Will the US inflation numbers cement a September Fed rate cut and fuel an Asian equity market rally?

Hang Seng Index and China Mainland Stocks Gain on EU Tariff Talks

Meanwhile, the Hang Seng Index advanced by 0.32% on Friday morning. Hopes of progress in ending planned EU tariffs on electric vehicle imports from China contributed to the gains. The EU reportedly adjusted tariffs on EV imports from China, raising hopes for further changes and easing immediate fears of an all-out trade war.

The Hang Seng Index benefited from upward trends in the Hang Seng Mainland Properties (HSMPI) and the Hang Seng Tech (HSTECH) Indexes.

While the Hang Seng Tech Index gained 0.17%, Baidu (9888) and Alibaba (9988) were down 0.35% and 0.28%, respectively.

From Mainland China, the Shenzhen Composite and CSI 300 were up 0.62% and 0.33%, respectively.

Will progress on EU-China tariff negotiations revive foreign demand for Mainland China stocks?

Nikkei Climbs as the USD/JPY Hits 161

The Nikkei Index advanced by 0.98% on Friday morning, with the USD/JPY striking a morning high of 161.283.

Major stocks like Softbank Group Corp (9984) and Tokyo Electron Ltd. (8035) rallied 2.86% and 1.67%, respectively. Sony Group Corporation (6758) gained 1.52%.

Investors ignored Japanese government threats to intervene in the forex markets. Minister of Finance Shunichi Suzuki voiced concerns about foreign exchange movements, suggesting intervention to bolster the Yen.

The Yen weakened despite an uptick in headline inflation. The Tokyo annual inflation rate rose from 2.2% to 2.3% in June. However, the closely watched CPI excluding Food and Energy inflation advanced from 1.2% to 1.4%, which was lower than an expected 1.9%.

Will the inflation numbers prompt a July Bank of Japan rate hike and a more aggressive-than-planned cut to Japanese Government Bond purchases?

ASX 200 Gains on Commodity Price Trends

The ASX 200 rose by 0.40% on Fri morning. The tech sector and overnight gains in Gold and Oil contributed to the early rise.

Evolution Mining Ltd (EVN) was up 0.14%, while Woodside Energy Group Ltd (WDS) advanced by 0.50%. The S&P/ASX All Technology Index (XTX) rose by 0.52%, tracking the Nasdaq mini.

In conclusion, investor hopes of a softer US inflation fueled buyer demand for riskier assets on Friday morning. However, hotter-than-expected US inflation numbers could impact Fed rate cut bets and the Asian markets on Monday.