Hang Seng Index, Nikkei Index, ASX 200: HSI Dips as PBoC Holds Rates

US Equity Market Futures Send Mixed Signals

On Wednesday, June 19, the US equity markets were closed for the Juneteenth holiday.

Nevertheless, the US futures indices sent mixed signals in the Thursday, June 20, Asian morning session. The Nasdaq mini and S&P mini saw gains of 61 and 6 points, respectively, while the Dow mini declined by 60.

Notably, 10-year US Treasury yields climbed to 4.252%, testing market risk sentiment.

Later in the session on Thursday, US initial jobless claims could influence investor expectations of a September Fed rate cut. Economists expect initial jobless claims to fall from 242k to 235k in the week ending June 15. Lower-than-expected numbers could signal tighter labor market conditions. Tighter labor market conditions may reduce investor bets on a September Fed rate cut.

PBoC Leaves Loan Prime Rates Unchanged

The People’s Bank of China left the 1-year and 5-year loan prime rates (LPR) unchanged at 3.45% and 3.95%, respectively, on Thursday, June 20.

Will the PBoC and Beijing provide further policy and stimulus measures to boost growth?

Economists expected the PBoC to hold despite lingering concerns about the Chinese economy. Cuts to loan prime rates would reduce the cost of borrowing and drive business investment and consumer pending. An improving demand outlook would drive buyer demand for riskier assets.

Nevertheless, the lack of further policy easing to bolster the Chinese economy weighed on buyer demand for Mainland China and Hang Seng Index-listed stocks.

Hang Seng Index Falls into the Red after the PBoC Decision

The Hang Seng Index declined by 0.15% on Thursday morning. Caution hit the markets as investors await fresh US data to assess whether the Fed can deliver a September interest rate cut.

The Hang Seng Mainland Properties Index (HSMPI) slid by 1.37%, with the Hang Seng Tech Index (HSTECH) declining by 0.73%.

Alibaba (9988) and Baidu (9888) saw notable losses, falling by 0.61% and 0.34%, respectively.

Furthermore, the Mainland China equity markets also spent the Thursday morning session in negative territory. The Shenzhen Composite Index and CSI 300 fell by 0.77% and 0.44%, respectively.

Nikkei Falls Despite A Weaker Yen

The Nikkei Index declined by 0.65% Thursday morning. Risk aversion overshadowed the effects of a weaker Yen, with the USD/JPY on a six-day winning streak.

Fast Retailing Co. Ltd. (9983) slid by 1.45%, with Kiddi Corp (9433) declining by 0.58%. Softbank Group Corp (9984) was down 0.20%.

There were no economic indicators from Japan for investors to consider. Nevertheless, the USD/JPY move toward 160 could force the Bank of Japan to consider an interest rate hike to bolster the Japanese Yen.

BoJ Deputy Governor Ryozo Himino recently spoke about the impact of a weaker Yen on the economy, stating,

“Exchange-rate fluctuations affect economic activity in various ways. It also affects inflation in a broad-based and sustained way, beyond the direct impact on import prices.”

A Bank of Japan rate hike could strengthen the Yen and affect buyer demand for Nikkei Index-listed export stocks.

ASX 200 Joins the Broader Market in Negative Territory

The ASX 200 fell by 0.07% on Thursday, tracking the Dow mini into negative territory. Moreover, commodity price trends and concerns about a more hawkish RBA policy stance contributed to the losses.

Mining giant BHP Group Ltd (BHP) was down 0.37% on Thursday, with gold (XAU/USD)-related stock Evolution Mining Ltd (EVN) sliding by 1.65%.

Concerns about the RBA interest rate trajectory affected banking stocks. ANZ Group Holdings Ltd. (ANZ) and National Australia Bank Ltd. (NAB) were down 0.27% and 0.18%, respectively.

For upcoming economic events, refer to our economic calendar.