Hang Seng Index Down on PBoC Inaction; Nikkei 225 Soars with Tech Stock Gains

US Equity Markets: Nasdaq Extends Winning Streak to Eight

US equity markets opened the week on a strong note on Monday, August 17. The Nasdaq Composite Index rallied 1.39%, extending its winning streak to eight sessions. Additionally, the Dow and the S&P 500 advanced by 0.58% and 0.97%, respectively.

The Fed Rate Path and Market Speculation

Investor speculation about multiple 2024 Fed rate cuts drove buyer demand for riskier assets as the Jackson Hole Symposium loomed.

Investors expect Fed Chair Powell to greenlight a September interest rate cut on Friday. A recent Reuters Poll showed that economists predict 25-basis point rate cuts at the three remaining meetings in 2024, including September. Moreover, the economists expected the US to avoid a recession. A dovish Fed rate path and a soft economic landing could boost demand for riskier assets.

Speculation about the possibility of a soft US landing and multiple 2024 Fed rate cuts set the tone for the Asian Tuesday session.

Expert Commentary

On Monday, Bloomberg TV Chief Markets Editor David Ingles shared a chart showing a 30% probability of a US recession.

Arch Capital Global Chief Economist Parker Ross remarked on the New York Fed’s latest Labor Market Survey, stating,

“Key Takeaway: There is growing concern about job loss and a corresponding decline in workers expecting to move to a new employer, particularly among workers aged 45 and under. The results of this survey are yet another reflection of how concerned consumers are about the labor market, even as the Fed has only recently declared it “balanced.”

A deteriorating US labor market could pressure the Fed to deliver a more aggressive 50-basis point September rate cut.

China’s Economic Woes: PBoC Keeps Rates Unchanged

On Tuesday, the People’s Bank of China (PBoC) left the one-year and five-year loan prime rates (LPR) unchanged at 3.35% and 3.85%, respectively.

The lack of additional policy measures to bolster the Chinese economy impacted hopes for a fiscal stimulus package from Beijing.

In Q2 2024, the Chinese economy expanded by 4.7%, down from 5.3% in Q1 2024. Recent economic indicators for July suggested the possibility of a further slowdown in growth, challenging the 5% growth target for 2024. Further policy measures could be crucial for the Hang Seng Index and Mainland stocks.

Hang Seng and Mainland China React to PBoC Inaction

The Hang Seng Index declined by 0.29% on Tuesday morning. PBoC inaction to bolster the Chinese economy overshadowed positive sentiment regarding the US economy and Fed rate path.

The Hang Seng Mainland Properties Index (HSMPI) slid by 1.13%, while the Hang Seng Tech (HSTECH) declined by 0.12%. Alibaba (9988) and Tencent (0700) fell by 1.17% and 0.40%, respectively, while Baidu (9888) gained 1.46%.

Mainland equity markets mirrored the negative sentiment. The CSI 300 and the Shenzhen Composite Index were down by 0.67% and 1.02%, respectively.

Nikkei Index Gains Despite Yen Strength

The Nikkei Index was up 1.78% on Tuesday, with tech stock gains countering the effects of a stronger Yen on export-listed stocks. On Monday, the USD/JPY declined by 0.66% to close at 146.569.

Tokyo Electron Ltd. (8035) and Softbank Group Corp. (9984) saw gains of 1.60% and 2.32%, respectively, while Fast Retailing Co. Ltd (9983) rallied 2.89%.

ASX 200 Rises on US Gains and RBA Guidance

The ASX 200 Index rose by 0.24% on Tuesday morning, following overnight gains from the US markets. Furthermore, the RBA Meeting Minutes eased fears of a possible September rate hike, supporting demand for ASX-listed stock, especially in the mining and gold sectors.

Gold-related stock Northern Star Resources Ltd. (NST) gained 0.90% on sentiment toward the Fed rate path and the return of gold prices to $2,500. Mining giants BHP Group Ltd (BHP) and Fortescue Metals Group Ltd. (FMG) rose by 0.92% and 1.15%, respectively, following an overnight rise in iron ore prices.

Investors should remain alert, with earnings and central bank commentary pivotal after the shifting sentiment toward the US economy. 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.