Hang Seng Index, ASX 200, Nikkei Index: HSI Dips Despite ASX 200 and Nikkei 225 Gains

US Markets: Retail Sales and Fed Rate Cut Prospects

On Tuesday, July 16, US retail sales data eased investor fears of a hard landing. While retail sales stalled in June, retail sales ex-autos increased by 0.4% in June after a 0.1% rise in May.

The retail sales numbers continued to support a September Fed rate cut.

According to the CME FedWatch Tool, the chances of a September Fed rate cut increased from 99.9% on Monday, July 15, to 100% on Tuesday, July 16.

Lower interest rates reduce borrowing costs, potentially improving company profits, a positive for stocks.

What the Experts Say

James Picerno, Editor of the US Business Cycle Risk Report, commented on the retail sales data, saying,

“Another sign that the consumer sector is slowing: US retail sales were essentially flat in June. That’s better than the -0.3% consensus forecast, but the spending trend’s looking softer lately.”

US Treasury Yields and US Equity Market Trends

10-year US Treasury yields slid by 73 basis points to 4.160% on Tuesday, the lowest since March 2024. The slide in yields supported gains across the US equity markets.

The Dow rallied 1.85%, while the Nasdaq Composite Index and the S&P 500 saw gains of 0.20% and 0.64%, respectively.

Asian Markets: Impact of China’s GDP and IMF Projections

Investor bets on a September Fed rate cut may set the tone for the Wednesday morning Asian session. However, the Communist Party’s Third Plenum remains a focal point after weak Q2 GDP data from China.

The International Monetary Fund (IMF) released its growth projections on Tuesday. Notably, the IMF raised China’s 2024 growth projection from 4.6% in April to 5% in July. However, IMF Chief Economist Pierre-Olivier Gourinchas responded to a question relating to China’s Q2 GDP numbers, stating,

“Growth in China, in particular, consumer confidence and the problems in the property sector are still lingering. This is something that we had flagged in our update as a risk to the Chinese economy and that seems to be, perhaps, materializing. So that’s something that we’ll take into account when we do our full set of projections in October.”

Updates from the Communist Party’s Third Plenum could be crucial after the Q2 GDP numbers. Meaningful fiscal policy measures could boost demand for Hang Seng and ASX 200-listed stocks.

However, Natixis Bank Asia Pacific Chief Economist Alicia Garcia Herrero thinks moderate measures are likely, saying,

“The difficulty in simultaneously achieving both economic and fiscal targets is a key reason that only moderate policies will likely be announced.”

Hang Seng Index and Mainland China Stocks Reflect China Woes

Meanwhile, the Hang Seng Index declined by 0.14% on Wednesday morning. However, bets on a September Fed rate hike boosted real estate and tech stocks.

The Hang Seng Tech (HSTECH) Index advanced by 0.56%. Baidu (9888) and Alibaba (9988) gained 0.38% and 1.06%, respectively, while Tencent (0700) slid by 1.99%.

The Hang Seng Mainland Properties Index (HSMPI) was up 1.53%.

Mainland China’s equity markets started the session in negative territory. The Shanghai SE Composite Index and CSI 300 were down 0.32% and 0.17%, respectively.

Nikkei Index Is Higher on Weaker Yen

The Nikkei Index gained 0.11% on Wednesday morning. A stronger USD/JPY boosted demand for Nikkei-listed export stocks.

KDDI Corp. (9433) and Sony Group Corporation (6758) saw gains of 0.51% and 0.43%, respectively. Nissan Motor Corp. (7201) advanced by 1.52%.

ASX 200 Tracks the Dow Higher

The ASX 200 Index advanced by 0.82% on Wednesday morning, tracking overnight gains on the Dow.

Gold-related stocks Northern Star Resources Ltd. (NST) and Evolution Mining Ltd. rallied 4.30% and 2.04%, respectively, following gold spot gains on Tuesday.

Investors should remain vigilant, with the Communist Party’s Third Plenum a focal point. 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 trade the Asian equity markets.