Hang Seng Index, Nikkei Index, ASX 200: HSI Drops on China GDP as ASX 200 Hits 8,000

US Inflation and the Fed Rate Path

On Friday, July 12, headline US producer prices beat forecasts. Core producer prices advanced by 0.4% in June after a 0.3% increase in May. However, key sub-components signaled a possible return of disinflation.

Capital Economics Chief North America Economist Paul Ashworth commented on the Producer Price Report. He stated,

“The PPI components that feed into the Fed’s preferred PCE deflator inflation measure were significantly lower than expected for June and it looks like May’s PCE gain could be revised down too, albeit only slightly.”

The US PPI Report supported expectations of a Fed interest rate cut. According to the CME FedWatch Tool, the probability of a September Fed rate cut surged from 77.7% on July 5 to 96.3% on July 12.

The US equity markets ended the week on a high note. On Friday, the Nasdaq Composite Index and the Dow gained 0.63% and 0.62%, respectively, while the S&P 500 advanced by 0.55%.

The US PPI Report set the tone for the Monday Asian session. However, an economic data deluge from China also influenced market risk sentiment.

China Economic Indicators

On Monday, July 15, the Chinese economy was in focus after the recent inflation numbers.

The Chinese economy expanded by 4.7% in Q2, down from 5.3% in Q1.

Other economic indicators included retail sales, industrial production, fixed asset investment, and unemployment rate numbers.

The figures for June signaled a loss of momentum at the end of Q2 that could impact growth in Q3.

The economic indicators coincided with the beginning of the Communist Party’s Third Plenum.

Will Beijing Announce a Fiscal Stimulus Bazooka to Bolster the Chinese Economy?

Investors remain hopeful of fresh fiscal stimulus measures from Beijing to bolster the Chinese economy. However, economists believe Beijing will roll out more moderate measures, which could impact market risk sentiment.

Natixis Bank Asia Pacific Chief Economist Alicia Garcia Herrero stated,

“The difficulty in simultaneously achieving both economic and fiscal targets is a key reason that only moderate policies will likely be announced. China’s future growth model requires a shift to high-skilled manufacturing and stronger local government finances, but that’s unlikely to be achieved in the short term.”

The GDP numbers affected buyer demand for HK and Mainland China equity market-listed stocks.

Hang Seng Index and Mainland China Stocks Fall on GDP Numbers

Meanwhile, the Hang Seng Index declined by 0.91% on Monday morning. Investors reacted to the weaker-than-expected GDP numbers from China.

The Hang Seng Tech (HSTECH) Index slid by 2.00%. Baidu (9888) tumbled 3.57%, while Alibaba (9988) and Tencent (0700) were down 0.89% and 1.26%, respectively.

The Hang Seng Mainland Properties Index (HSMPI) declined by 1.72%, with house market data from China contributing to the losses. House prices decreased 4.5% year-on-year in June after falling 3.9% in May.

Mainland China’s equity markets also saw morning losses. The Shenzhen Component Index and CSI 300 were down by 0.44% and 0.06%, respectively.

ASX 200 Tracks the US Equity Markets Higher

The ASX 200 Index advanced by 0.81% on Monday morning, breaking through 8,000. Bank and tech stocks were among the front-runners, while gold, mining, and oil stocks contributed to the gains.

Woodside Energy Group Ltd (WDS) rallied 1.64%, while National Australia Bank Ltd. (NAB) gained 1.30%.

The S&P ASX All Technology Index (XTX) was up 1.38% in the morning session.

However, there was no trading on the Nikkei 225, with Japan’s markets closed for the Marine Day holiday.

Investors should remain alert as the focus shifts to the Communist Party’s Third Plenum. Closely monitor the news wires, real-time data, and expert commentary to manage trading strategies accordingly. Stay informed with our latest news and analysis to trade the Asian equity markets.