Hang Seng Index Climbs on Fed Rate Cut Bets as Real Estate and Tech Lead Gains

US Equity Markets Advance on Fed Rate Cut Speculation

On Thursday, September 12, the US equity markets extended gains from the prior session. The Nasdaq Composite Index advanced by 1.00%, while the Dow and the S&P 500 ended the session up 0.58% and 0.75%, respectively.

US Economic Indicators Fuel Speculation about a 50-Basis Point Rate Cut

On Thursday, US initial jobless claims increased from 228k in the week ending August 31 to 230k in the week ending September 7. Weaker labor market conditions could soften wage growth and consumer spending, possibly dampening demand-driven inflation.

Additionally, US producer prices increased by 1.7% year-on-year in August, down from 2.1% in July. Lower producer prices could signal weaker demand as producers typically lower prices to remain competitive. A decline in producer prices, a leading inflation indicator, could suggest softer inflation, possibly raising bets on a 50-basis point September Fed rate cut.

According to the CME FedWatch Tool, the chances of a 50-basis point September Fed rate cut jumped from 14.0% on Wednesday, September 11, to 45.0% on Thursday, September 12.

Increased expectations of a 50-basis point Fed rate cut and US equity gains set a positive tone for the Friday Asian session.

Hang Seng Index Advances on Fed Policy Outlook

On Friday morning, the Hang Seng Index advanced by 0.98% as speculation about a 50-basis point Fed rate cut intensified.

Real estate stocks led the way, with the Hang Seng Mainland Properties Index rallying 2.21%, as expectations of a more dovish Fed rate path could lower borrowing costs.

Tech stocks also contributed, with the Hang Seng Tech Index (HSTECH) up 0.77%. Notable movers included Baidu (9888), which gained 1.10%, while Alibaba (9988) and Tencent (0700) advanced by 0.36% and 0.54%, respectively.

However, Mainland China equities lagged amid concerns about the Chinese economy. The CSI 300 inched 0.01% higher, while the Shanghai Composite declined by 0.12%.

On Friday, FICC Investor CN Wire highlighted growing concerns about the Chinese economy, stating,

“Xi Jinping on Thursday urged the country’s central and local governments to properly implement economic policies for the 3rd and 4th quarter in order to achieve its full-year economic and social development goals, CCTV citing his remarks in a seminar. Xi’s comments came after a growing number of Wall Street economists, including UBS Group AG and JPMorgan Chase & Co., began predicting China may miss its economic growth goal of about 5% this year.”

Nikkei Index Falls as US Dollar Demand Wanes

The Nikkei Index was down by 0.89% on Friday morning, with a weaker USD/JPY pair impacting buyer demand for Japanese equities.

Softbank Group Corp. (9984) slid by 1.25%, while Fast Retailing Co. Ltd. (9983) declined by 1.12%. Nissan Motor Corp. (7201) fell by 0.81%.

ASX 200 Extends Gains on Strong Mining Stocks

The ASX 200 Index rose by 0.28% on Friday morning. Gold and mining stocks led the gains.

Notable movers included Fortescue Metals Group (FMG), which surged by 4.53% in response to overnight gains in iron ore prices. Northern Star Resources Ltd. (NST) advanced by 3.96% as sentiment toward the Fed rate path drove gold prices higher.

Investors should remain alert, with central bank commentary pivotal as the US Jobs Report looms. 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 manage positions across the Asian equity markets.