Hang Seng Index Jumps on China Stimulus, While Nikkei Dips on Middle East Conflict

By:

Published: Oct 2, 2024, 03:27 GMT+00:00

Key Points:

US equity markets kicked off October with notable losses as Middle East tensions drove a flight to safety.
Hang Seng surged 4.63%, led by real estate and tech stocks, following China's economic stimulus, with Shimao and Baidu among top gainers.
Nikkei 225 dropped 1.55% as Middle East conflict dampened sentiment, despite a stronger USD/JPY supporting some sectors.

US Equity Markets Kickstart October in the Red

On Tuesday, October 1, the US equity markets started the month with significant losses. The Nasdaq Composite Index slid by 1.53% on Tuesday, while the Dow and the S&P 500 declined by 0.41% and 0.93%, respectively.

An escalation in the Middle East conflict triggered a flight to safety as investors reacted to news of an Iranian missile attack on Israel. The rising tensions in the Middle East set the tone for the Wednesday Asian session.

US Job Openings Reduce Fed Rate Cut Bets

On Tuesday, US labor market data tempered expectations of a 50-basis point November Fed rate cut.

According to the JOLTs Report, job openings increased from 7.711 million in July to 8.040 million in August. Higher job openings could lower unemployment, possibly boosting wage growth and consumer spending. An uptick in consumer spending could support the US economy as it contributes over 60% to GDP.

Furthermore, the Fed could reduce the need for aggressive rate cuts if inflation is cooling, but the labor market remains tight.

Expert Views on the US Jobs Report

Arch Capital Chief Global Economist Parker Ross gave a cautious view on the JOLTs Report, commenting:

“The August Job Openings and Labor Turnover Survey (JOLTS) showed the multi-year cooldown in the labor market continued. While the pace of hiring typically rises during expansions, this cycle has instead been driven by separations (i.e. quits, layoffs, retirements, etc…) slowing alongside a slower pace of hiring since early 2022.“

Aussie Ai Group Industry Index Rises Modestly

On Wednesday, October 2, economic data from Australia supported demand for ASX 200-listed stocks. The Ai Group Industry Index increased from -23.5 in August to -18.6 in September, missing expectations of a jump to -10.0. The report revealed slight improvements in employment, new orders, and activity/sales while input prices remained elevated.

The modest increase may support bets on a Q4 2024 RBA rate cut that may boost demand for ASX 200-listed stocks.

Hang Seng Index Surges on Chinese Policy Support

HSI 021024 Daily Chart

On Wednesday, the Hang Seng Index surged by 4.63%. Investors continued to respond to Beijing’s policy measures to bolster China’s economy. Real estate and tech stocks drove the Hang Seng Index higher.

The Hang Seng Mainland Properties Index (HMPI) extended its gains from last week, jumping by 10.54%. Notable movers in the real estate sector included Shimao Group Holdings Ltd. (0813), which surged 97%, while Longfor Group Holdings Ltd. (0960) rallied 18%.

Meanwhile, the Hang Seng Tech Index (HSTECH) gained 7.45%. Baidu (9888) advanced by 7.29%, while Alibaba (9988) and Tencent (0700) were up by 4.18% and 4.51%, respectively.

Mainland China’s markets remained closed on Wednesday for the National Holidays.

Nikkei Index Slides on Middle East Tensions

Nikkei 021024 Daily Chart

The Nikkei 225 was down 1.55% on Wednesday morning. A stronger USD/JPY had a limited impact on demand for Nikkei Index-listed stocks as investors monitored updates from the Middle East.

Tokyo Electron (8035) and Sony Corp. (6758) declined by 2.76% and 4.16%, respectively, while Softbank Group Corp. (9984) fell by 1.64%.

Bank of Japan monetary policy uncertainty possibly contributed to the morning losses. Investors remain wary about the lingering threat of a Q4 2024 BoJ rate hike that could trigger another Yen carry trade unwind.

ASX 200 Sees Mining Stocks Offset Geopolitical Risks

ASX 200 sees modest gain, supported by gold, oil, and mining stocks.

ASX 200 021024 Daily Chart

In contrast, the ASX 200 Index gained 0.01% on Wednesday morning. Gold, mining, and oil stocks provided morning support.

Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) advanced by 1.64% and 1.03%, respectively. Iron ore prices trended higher on Tuesday, driving demand for mining stocks as China’s recent policy measures resonated.

An escalation in the Middle East conflict pushed oil prices higher on supply disruption fears. Woodside Energy Group Ltd. (WDS) rallied 3.14%. A flight to safety also boosted demand for gold stocks, with Northern Star Resources Ltd (NST) gaining 0.69%.

With the focus remaining on the central banks, investors should stay alert and closely monitor news wires, real-time data, and expert commentary to adjust trading strategies accordingly. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.