Hang Seng Index Extends Losses on China Woes Despite Tencent Gains

US Markets: Fed Rate Cut Bets Gain Focus

For investors tracking US equity markets, Wednesday’s session brought a mix of gains and losses. The Dow and the S&P 500 advanced by 0.11% and 0.2%, respectively, while the Nasdaq Composite Index dropped 0.26%.

Nevertheless, rising expectations for a December Fed rate cut influenced buyer demand for Dow and S&P 500-listed stocks.

Impact of US CPI on Rate Cut Expectations

US inflation figures boosted bets on a 25-basis point December Fed rate cut on Wednesday. The annual inflation rate increased from 2.4% in September to 2.6% in October, aligned with consensus. Significantly, core inflation held steady at 3.3%, easing fears of a pickup in underlying inflation.

According to the CME FedWatch Tool, the chances of a 25-basis point December Fed rate cut increased from 58.7% on November 12 to 82.5% on November 13 in response to the US CPI Report. The upswing in expectations for a December Fed rate cut likely set the tone for the Thursday Asian session.

Expert Views on the US CPI Report

Wall Street Journal Chief Economics Correspondent Nick Timiraos remarked on the CPI Report, stating,

“An uncomfortably firm CPI print would have made a December rate cut a closer call that would’ve been trickier to communicate. But the number wasn’t as bad as feared, removing an obstacle to a December cut.”

Aussie Unemployment Rate Holds Steady

On Thursday, November 14, Aussie labor market data drew interest amid speculation about an RBA rate cut.

While the unemployment rate remained steady at 4.1% in October, full-time employment rose, though not as strongly as forecasted. The softer increase may raise questions about the outlook for labor market conditions. Rising bets on a December RBA rate cut could increase demand for rate-sensitive ASX-200 listed stocks.

Hang Seng and Mainland China Equities Extend Losses

In Asian markets, the Hang Seng Index extended its losses from Wednesday, declining by 1% on Thursday morning. Investor jitters about potential US tariffs on Chinese goods continued impacting demand for Hong Kong and Mainland China-listed stocks. Beijing’s recent policy measures have also failed to improve sentiment toward China’s economic outlook.

Real estate and tech stocks saw heavy losses. The Hang Seng Mainland Properties Index slid by 3.02%, while the Hang Seng Tech Index was down 1.57%. Among the tech giants, Alibaba (9988) and Baidu (9888) declined by 1.44% and 1.56%, respectively. However, Tencent (0700) bucked the trend, advancing by 0.62% after posting better-than-expected earnings.

Mainland China’s equity markets also faced selling pressure, with the CSI 300 and the Shanghai Composite falling 0.20% and 0.30%, respectively.

Nikkei Advances on USD/JPY Return to 156

Japan’s Nikkei Index advanced by 0.10% on Thursday morning, supported by a weaker Japanese Yen. The USD/JPY touched 156 for the first time since July, fueling demand for Nikkei Index-listed export stocks.

Nissan Motor Corp. (7201) and Sony Corp. (6758) saw gains of 0.31% and 1.06%, respectively. However, tech stocks tracked the Nasdaq into negative territory, with Softbank Group Corp. (9984) and Tokyo Electron (8035) posting morning losses.

ASX 200 Climbs on Fed Rate Cut Bets

The ASX 200 Index was up 0.24% on Thursday morning, potentially ending a three-day losing streak. Banking and oil-related stocks contributed to the gains, countering declines in mining and gold stocks.

Commonwealth Bank of Australia (CBA) rallied 1.22%, while ANZ (ANZ) gained 0.82%. CBA’s rise followed Wednesday’s earnings report, which highlighted a stable loan book.

However, Northern Star Resources Ltd. (NST) slid by 3.60% as gold prices continued trending lower. Gold was down 0.31% to $2,565, following a 0.97% loss on Wednesday.

Looking Ahead

Investors should track stimulus-related chatter from Beijing. Measures targeting consumer demand could boost demand for riskier assets. Investors should also consider central bank commentary as the USD/JPY moved into a potential intervention zone. Stay informed on upcoming central bank statements and market data releases for detailed insights.