Hang Seng Index Gains on Beijing Stimulus Bets, Tech Stocks Lead

US Markets: Corporate Earnings and Treasury Yields

On Thursday, October 24, US equity markets had a mixed session. The Nasdaq Composite Index and the S&P 500 posted gains of 0.76% and 0.21%, respectively, while the Dow fell by 0.33%.

The Nasdaq gained on corporate earnings. Notably, Tesla (TSLA) ended the session up by 21.92% on Q3 earnings beating estimates. Growth forecasts also fueled optimism.

In the bond markets, 10-year US Treasury yields eased back from Wednesday’s 3-month intraday high of 4.260%. Despite easing back, yields remained relatively high, continuing to test demand for riskier assets.

US Labor Market Data, Services PMI Figures, and the Fed Rate Path

On Thursday, US jobless claims and Services PMI data boosted expectations for a soft US economic landing. Initial jobless claims dropped from 242k (week ending October 12) to 227k (week ending October 19). A resilient US labor market could support private consumption, which accounts for over 60% of GDP.

Also, the S&P Global Services PMI unexpectedly rose from 55.2 in September to 55.3 in October. Firms reported the largest increase in new business since April 2022, while service sector inflation softened. Notably, prices charged across the US private sector fell to their lowest since May 2020, attributable to weaker service sector inflation.

Expert Views on the Fed Rate Path

S&P Global Market Intelligence Chief Business Economist Chris Williamson commented on the October numbers, stating,

“October saw business activity continue to grow at an encouragingly solid pace, sustaining the economic upturn that has been recorded in the year to date into the fourth quarter. The October flash PMI is consistent with GDP growing at an annualized rate of around 2.5%.”

Tokyo Inflation Drops Below BoJ Target

On Friday, October 25, Tokyo’s inflation figures likely tempered investor expectations for a Q4 2024 Bank of Japan rate hike. The core inflation rate dropped from 2.0% in September to 1.8% in October, below the BoJ’s 2% target.

Falling bets on a Q4 BoJ rate hike could reduce buyer demand for the Japanese Yen, supporting Nikkei-listed export stocks. However, market uncertainty about Japan’s upcoming general election was another consideration.

Hang Seng Index and Mainland China Reverse Thursday’s Losses

In Asian markets, the Hang Seng Index advanced by 0.73% on Friday morning, partially reversing Thursday’s 1.30% loss. Rising bets on multiple Q4 2024 Fed rate cuts and expectations for further policy measures from Beijing drove demand.

Real estate and tech stocks trended higher. The Hang Seng Mainland Properties Index gained 0.58%, while the Hang Seng Tech Index advanced by 0.89%. Notable performers included Alibaba (9988) and real-estate stock Agile Group Holdings (3383), which saw gains of 2.44% and 2.41%, respectively.

Mainland China’s equity markets also advanced in the morning session, with the CSI 300 and Shanghai Composite rising 0.50% and 0.45%, respectively.

Hong Kong and Mainland China-listed stocks advanced despite the People’s Bank of China keeping the 1-Year Medium-Term Lending Facility Rate (MLF) 2.0%. Hopes of further stimulus measures from Beijing boosted demand for Chinese stocks.

Nikkei Drops as USD/JPY Drops Below 152

Meanwhile, the Nikkei Index declined by 0.95% on Friday morning. On Thursday, October 24, the USD/JPY pair fell by 0.61 to end the session at 151.815. The pullback from 153 impacted demand for Nikkei Index-listed stocks

SoftBank (9984) and Sony Corp. (6758) were down by 1.41% and 1.45%, respectively, while Nissan Motor Corp. (7201) slipped by 0.58%.

ASX 200 Advances on Upswing in Commodity Price

The ASX 200 Index was up 0.28% on Friday morning. Gold, mining, and tech-related stocks contributed to the morning gains.

Mining giants stocks BHP Group Ltd (BHP) and Rio Tinto Ltd (RIO) advanced by 0.62% and 1.11%, respectively. Iron ore spot prices rose by 2.20% on Thursday and extended its gains on Friday morning, driving demand for mining stocks.

Gold-related stock Northern Star Resources (NST) rallied 3.33% on overnight gains in gold spot prices. Meanwhile, the S&P/ASX All Technology Index advanced by 1.41%. Wisetech Global Ltd. (WTC) surged 13.8% as investors reacted to the news of CEO Richard White stepping down as CEO.

Looking Ahead

Investors should remain vigilant. News related to fiscal stimulus from China and central bank commentary could affect market risk appetite. Investors remained divided on the timing of BoJ and RBA policy maneuvers. Additionally, US Treasury yields and futures will likely influence market risk sentiment.