Hang Seng Index Gains Amid Fed Relief and Beijing Stimulus Optimism

How Cooler Inflation Data Boosted US Markets and What It Means for Asia

Global markets faced a mix of relief and anticipation as economic data and central bank commentary took the spotlight.

Here’s how US equity markets performed on Friday, December 20.

US equity markets enjoyed a positive end to the week. The Nasdaq Composite Index and the S&P 500 reversed Thursday’s losses, rising 1.03% and 1.09%, respectively. The Dow gained 1.18%.

In the bond markets, 10-year US Treasury yields fell for the second time in ten sessions, driven by softer-than-expected inflation data. Lower yields boosted demand for riskier assets.

Inflation Data Fuels Market Optimism

The US Personal Income and Outlays Report showed the Core PCE Price Index increasing by 0.1% month-on-month in November, down from October’s 0.3% rise. Personal income also increased at a slower pace, suggesting a weaker demand outlook. Friday’s data supported bets on the Fed maintaining rates at 4.5% in January.

The CME FedWatch Tool reflected market sentiment, with the probability of a January Fed rate cut rising modestly from 8.6% on Thursday to 10.7% on Friday.

How Did Economists View the Inflation Data and the Impact on Fed Rate Path

Arch Capital Global Chief Economist Parker Ross reacted to Friday’s Personal Income and Outlays Report, stating,

“Not a lot of surprises based on what we had already seen from the CPI & PPI reports, outside of maybe the magnitude of the Other Services drag. While this report doesn’t change the narrative, it’s at least nice to have a month with below-target inflation in the books after two above-target prints in Sept & Oct.”

Ross underscored the market relief toward the inflation numbers rather than shifts in sentiment toward the Fed rate path.

Investor sentiment toward the data and the US market rally set the tone for Monday’s Asian session.

Hang Seng Index Advances on Fed Relief and Stimulus News

In Asian markets, the Hang Seng Index gained 0.42% on Monday morning. Friday’s US economic indicators fueled gains in real estate and tech stocks.

Tech giants Alibaba (9988) and Baidu (9888) were up by 3.42% and 0.50% in the morning session. The Hang Seng Mainland Properties Index advanced by 0.68%.

Media reports of further stimulus measures from Beijing to bolster the real estate sector contributed to the gains. CN Wire reported:

“The China Real Estate Newspaper, a media outlet under the administration of China’s Ministry of Housing and Urban-Rural Development, released a weekend editorial stating that there is still significant potential to be tapped in both existing and incremental policies to stabilize and consolidate the real estate market’s rebound from declines, especially financial policies and tools that need to be innovated and adjusted in a timely manner in response to the current situation.”

Mainland China markets also started the week positively, with the CSI 300 and the Shanghai Composite rising 0.83% and 0.37%, respectively.

Nikkei Index Gets Yen Support

Japan’s Nikkei Index advanced by 0.88% on Monday morning. The USD/JPY rose 0.13% to 146.571, supporting demand for Japanese stocks. The tech sector got a boost from Friday’s pullback in Treasury yields.

Tech stocks Tokyo Electron (8035) and Softbank Group (9984) posted gains of 1.65% and 0.72%, respectively. Sony Corp. (6758) was up 1.19%.

ASX 200 Mirrors Friday’s US Market Gains

Meanwhile, Australia’s ASX 200 Index rallied 1.29% on Monday, reversing Friday’s losses. While gains were broad-based, the largest contributions came from tech and banking stocks.

Falling US Treasury yields boosted demand for high-yielding Aussie banks, with Commonwealth Bank of Australia surging 2.26%. The S&P/ASX All Technology Index tracked Friday’s Nasdaq gains, advancing by 1.38%.

Meanwhile, Gold stock Northern Star Resources (NST) benefited from higher gold prices, gaining 0.95%.

Outlook

As markets approach the holiday season, volatility may persist with several key events to consider. The upcoming RBA Meeting Minutes, the Bank of Japan’s Summary of Opinions, stimulus-related updates from China, and US tariff developments will influence market sentiment.

Additionally, US economic data remain key drivers. Traders should monitor global economic trends and trade developments to navigate the shifting landscape.

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