Hang Seng Index Climbs as Baidu and Alibaba Surge with US Election in Focus

US Markets: Nasdaq Extends Winning Streak to Three Sessions

On Monday, October 28, US equity markets had a positive start to the week. The Nasdaq Composite Index extended its winning streak to three sessions, gaining 0.26%, while the Dow and the S&P 500 advanced by 0.65% and 0.27%, respectively.

Upbeat US economic data and easing fears of an escalation in the Middle East conflict drove demand for riskier assets. A sharp pullback in crude oil prices reflected sentiment toward Israel’s strike against Iranian targets that avoided oil infrastructure sites.

US Economic Indicators Support Soft Landing Bets

On Monday, the Dallas Fed Manufacturing Index climbed from -9.0 in September to -3.0 in October. Notably, production rebounded in October, rising from -3.2 to +14.6, supporting expectations for a soft US economic landing.

However, the upbeat numbers eased investor bets on a 25-basis point December Fed rate cut, pushing 10-year Treasury yields higher. According to the CME FedWatch Tool, the probability of a 25-basis point December Fed rate cut fell from 74.6% on October 25 to 71.1% on October 28. Higher yields capped the gains across the US equity markets.

Trump Gains Ground in Election Polls, Impacting Markets

Recent US Presidential Election polls show Donald Trump narrowing the gap with Kamala Harris, raising the chances of a Republican win. Markets view Trump as bullish for stocks, with the narrowing in the polls also boosting demand for Asian stocks.

10-Year Treasury yields eased back on Tuesday morning, further supporting demand for riskier assets.

Japan’s Stronger Labor Market Pressures the USD/JPY

On Tuesday, October 29, labor market data from Japan painted a rosier picture of the economy amidst political uncertainty. The unemployment rate fell from 2.5% in August to 2.4% in September, while the jobs/application rate rose from 1.23 to 1.24 in September.

The upbeat figures boosted demand for the Japanese Yen, with the USD/JPY pair down 0.19% to 152.979 in the morning session. However, the stronger Yen failed to dampen demand for Nikkei Index-listed stocks, with current USD/JPY price levels supporting demand for export stocks.

Hang Seng and Mainland Equities Climb on Stimulus Hopes

In Asian markets, the Hang Seng Index gained 0.44% on Tuesday morning. Overnight gains in the US equity markets drove demand for tech stocks. Hopes also lingered for further stimulus measures from Beijing to boost consumption.

The Hang Seng Tech Index rallied 2.00%, with tech giants Alibaba (9988) and Baidu (9888) advancing by 2.07% and 3.84%, respectively.

Mainland China’s equity markets also advanced in the morning session, with the CSI 300 and the Shanghai Composite gaining 0.24% and 0.12%, respectively.

Nikkei Extends Gains on BoJ Policy Expectations

Meanwhile, the Nikkei Index advanced by 0.55% on Tuesday morning. Political uncertainty from Japan’s unexpected election outcome may prompt the Bank of Japan to maintain current policy settings, supporting stock demand. The prospects of the BoJ maintaining interest rates at 0.25% in the near term could affect demand for the Japanese Yen, a positive scenario for export stocks.

Key movers included SoftBank Group Corp. (9984), which rallied 2.18%, while Nissan Motor Corp. (7201) and Sony Group Corp. (6758) saw gains of 0.41% and 0.46%, respectively.

ASX 200 Tracks US Market Gains

The ASX 200 Index advanced by 0.51% on Tuesday morning. Banking, gold, and mining stocks led the gains, while oil-related stocks dipped.

Mining giants stocks BHP Group Ltd (BHP) and Rio Tinto Ltd (RIO) saw gains of 0.71% and 1.12%, respectively, with Northern Star Resources (NST) rallying 2.08% as gold prices trended higher.

Banking stocks benefited from falling 10-Year US Treasury yields. Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) gained 0.85% and 0.93%, respectively. Demand for high-yielding Aussie bank stocks increased as US Treasury yields retreated.

Looking Ahead

Investors should remain alert. Fiscal stimulus-related news from China, election-related updates from Japan, and central bank commentary could affect market risk appetite. Additionally, US Treasury yields and futures will likely influence market risk sentiment.