Hang Seng Index, ASX 200: When Forecasts Hint at Rate Shifts and Economic Jitters

Key Insights:

• ASX 200 and Hang Seng started the week negatively; Japanese markets closed for a national holiday.
• Hang Seng falters; Evergrande’s crisis worsens.
• Anticipation builds as Fed, BoE, and BoJ decisions near. Potential for significant market reactions.

Overview of the Monday Session

On Monday, the ASX 200 and the Hang Seng Index kickstarted the week in negative territory. The Japanese markets were closed for Respect for the Aged Day.

Investors responded to the Friday pullback across the US equity markets, with tech stocks a drag. Rising oil prices spooked investors at the turn of the week. A sharp and sustained increase in crude oil prices could undo central bank efforts to tame inflationary pressures.

On Friday, the US equity markets ended the day in negative territory. The S&P 500 and NASDAQ Composite Index saw losses of 1.22% and 1.56%, respectively, with the Dow falling by 0.83%.

Central Banks Pose Significant Downside Risk for Riskier Assets

Tensions rose at the start of the week as investors prepared for the Fed, BoE, and BoJ interest rate decisions.

The markets are betting on the Fed to hit the pause button. However, the economic projections will expose investors to the risk of a sharp sell-off. Upward revisions to GDP and inflation and downward revisions to unemployment could fuel bets on a November rate hike. A more positive outlook could also push back the timing of a first interest rate cut to 2025.

There is also the question of the Bank of Japan and negative rates. Hints of a move away from negative rates would stoke a Yen reaction. A move away from negative rates would weigh on Japan’s export stocks.

RBA Meeting Minutes: A Pause or Confirmed End to Rate Hikes

This morning, the RBA meeting minutes will garner investor interest. Hints of further RBA rate hikes would fuel bets that central banks may have more in their tanks regarding interest rates.

This month, the RBA left the official cash rate unchanged at 4.1%. The Rate Statement hinted the RBA was at the end of the RBA monetary policy tightening cycle. China’s economic woes, uncertainty about domestic household spending, and the housing sector are several reasons for the RBA to hit the brakes.

Looking at the Futures Markets, the ASX 200 was down 21 points, with the Nikkei sliding by 230 points. The NASDAQ Composite Index rose by 0.01% on Monday, with the Dow and S&P 500 seeing gains of 0.02% and 0.07%, respectively.

ASX 200

The ASX 200 declined by 0.67% on Monday. Tech stocks weighed, with the S&P/ASX All Technology Index (XTX) sliding by 1.98%. Oil stocks also struggled.

Mining stocks had a mixed session. BHP Group Ltd (BHP) and Rio Tinto (RIO) gained 0.18% and 0.34%, respectively. Newcrest Mining (NCM) rose by 0.57%. However, Fortescue Metals Group (FMG) bucked the trend, falling 0.09%.

The big four banks also had a mixed start to the week. The National Australia Bank (NAB) and the Commonwealth Bank of Australia (CBA) fell by 0.34% and 0.51%, respectively.

ANZ Group (ANZ) and Westpac Banking Corp (WBC) gained 0.19% and 0.09%, respectively.

However, oil stocks tumbled. Woodside Energy Group (WDS) and Santos Ltd (STO) saw losses of 1.43% and 1.64%, respectively.

Hang Seng Index

The Hang Seng Index tracked the ASX 200 into the red, falling 1.39%. China Evergrande Group (3333.HK) weighed on the news of police detaining China Evergrande staff.

Alibaba Group Holding Ltd (9988.HK) and Tencent Holdings Ltd (0700.HK) saw losses of 2.38% and 1.58%, respectively.

Bank stocks also struggled. China Construction Bank (0939.HK) and the Industrial and Commercial Bank of China (1398.HK) fell by 1.13% and 1.32%, respectively. HSBC Holdings PLC (0005.HK) declined by 0.16%.

Nikkei 225

(Graph for reference purposes only)

The Japanese Markets were closed for Respect the Aged Day on Monday.

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