Hang Seng Index: China Stimulus Hopes Drive Gains Amid US Election Uncertainty

US Markets: Earnings and Economic Data Impact

On Friday, November 1, US equity markets started the month on a positive note. The Nasdaq Composite Index and the Dow gained 0.69% and 0.80%, respectively, while the S&P 500 advanced by 0.41%.

Atlassian Corp. (TEAM) was the best performer on the Nasdaq, surging by 18.99% on its quarterly earnings beat.

US Jobs Report Boosts Fed Rate Cut Bets

On Friday, the all-important US Jobs Report raised investor bets on November and December Fed interest rate cuts. While the US unemployment rate remained at 4.1% in October, nonfarm payrolls increased by just 12k, down from 223k in September. A weaker labor market could affect wages, dampening consumer spending and demand-driven inflation.

According to the CME FedWatch Tool, the probability of a 25-basis point December Fed rate cut to 4.25% increased from 71.1% on October 31 to 82.7% on November 1. The Jobs Report cemented expectations for a 25-basis point Fed rate cut on Thursday, November 7.

Friday’s US Jobs Report and US equity market gains set the tone for the Asian markets on Monday.

Standing Committee National People’s Congress Gets Underway

On Monday, November 1, the highly anticipated Standing Committee National People’s Congress will be the focal point. Markets expect stimulus measures targeting consumer consumption to bolster China’s economy. Fresh policy measures supporting demand could fuel investor appetite for Hong Kong and Mainland China-listed stocks.

Hang Seng and Mainland China Equities Advance on New Stimulus Bets

In Asian markets, the Hang Seng Index advanced by 0.16% on Monday morning. Hopes for new stimulus measures to support China’s economy countered uncertainty about the US presidential election.

The Hang Seng Tech Index rallied 1.07% in the morning session, offsetting losses across the real estate sector. Notably, Alibaba (9988) gained 1.05%, contributing to the gains, while Tencent (0700) was flat.

Mainland China’s equity markets also moved higher on expectations for new stimulus from Beijing. The CSI 300 and the Shanghai Composite advanced by 0.58% and 0.44%, respectively.

ASX 200 Tracks the US Markets Higher

The ASX 200 Index gained 0.38% on Monday morning. Banking and tech stocks contributed to the gains. The S&P/ASX All Technology Index rallied 1.06% in the morning session.

National Australia Bank (NAB) advanced by 0.85%, while Commonwealth Bank of Australia (CBA) rose by 0.84%. Rising bets on a December Fed rate cut drove demand for high-yielding Aussie bank stocks.

However, Northern Star Resources Ltd. (NST) slipped by 0.06% after Friday’s pullback in gold spot prices. Meanwhile, mining giants BHP Group Ltd (BHP) and Rio Tinto Ltd (RIO) fell by 0.40% and 1.09%, respectively. Mining stocks followed lower iron ore spot prices on Friday.

Nikkei Futures Gain Despite Stronger Yen

Japan’s markets were closed for Culture Day on Monday. However, the Nikkei 225 futures advanced on expectations for November and December Fed rate cuts. Futures advanced despite a stronger Japanese Yen, as the USD/JPY pair dropped by 0.68% to 151.884.

Looking Ahead

Looking ahead, investors should consider the US Presidential Election and updates from the National People’s Congress Standing Committee (NPCSC) meeting. New policy measures from Beijing may fuel demand for riskier assets.

However, a Trump victory could overshadow Beijing’s policy news. Markets expect the Trump administration to impose punitive tariffs on Chinese goods. Tariffs may adversely affect China’s trade terms and US-China relations. Stay informed with our latest news and analysis to manage your risks effectively.