Hang Seng Index Rallies on US Soft Landing Hopes, Mainland China Stocks Surge

US Equity Markets Have Mixed Fortunes

On Thursday, August 29, the US equity market had a mixed session as investors reacted further to NVIDIA’s (NVDA) earnings report. NVIDIA’s share price slid by 6.38% after missing top earnings expectations.

The Dow gained 0.59%, while the Nasdaq Composite Index declined by 0.23%. The S&P 500 ended the session flat.

US Economic Data Points to a Soft US Landing

US economic data from Thursday fueled bets on a soft US landing, with labor market data reflecting a resilient economy. Initial jobless claims slipped from 233k in the week ending August 17 to 231k in the week ending August 24. The Fed has increased its scrutiny of the US labor market after recent data suggested deteriorating labor market conditions.

Additionally, the US economy grew by 3.0% in Q2 2024, up from a first estimate of 2.8%. While the better-than-expected numbers eased bets on a 50-basis point Fed rate cut, a 25-basis point rate cut and a soft US landing set the tone for the Friday Asian session. Lower borrowing costs in a resilient macroeconomic environment could boost company profits.

Japan’s Inflation Signals Possible Bank of Japan Rate Hike

On Friday, higher-than-expected inflation numbers for Tokyo raised bets on a Q4 2024 Bank of Japan rate hike. The core inflation rate rose from 2.2% in July to 2.6% in August. While other stats from Japan were mixed, higher inflation trends may resonate.

The USD/JPY responded to the inflation numbers, falling from a high of 145.070 to a low of 144.649. A stronger Yen may impact buyer demand for Nikkei-listed export stocks.

Aussie Retail Sales Impact RBA Rate Hike Bets?

Aussie retail sales figures also drew investor interest amid speculation about a possible RBA rate hike. Retail sales stalled in July after rising by 0.5% in June. Softer consumer spending trends may dampen demand-driven inflation, possibly easing pressure on the RBA to hike rates.

AMP Head of Investment Strategy and Chief Economist Shane Oliver commented on the retail sales data, stating,

“Aust July retail sales flat, v mkt exp for +0.3%mom This followed two mths of support from EOFY sales but also suggests little boost from the tax cuts. Discretionary spending areas like clothing, dept stores & cafes fell. In other words, Australian households remain under pressure.”

Hang Seng and Mainland China Equities in Rally Mode

The Hang Seng Index gained 1.37% on Friday morning. Real estate and tech stocks surged on hopes of a US soft landing.

The Hang Seng Mainland Properties Index jumped by 3.38%, while the Hang Seng Tech (HSTECH) rallied by 2.46%.

Notable movers included Tencent (0700), which advanced 1.33%. Baidu (9888) and Alibaba (9988) saw gains of 1.17% and 1.27%, respectively.

The Mainland equity markets reversed their losses from Thursday, with the CSI 300 and the Shanghai Composite Index gaining 1.65% and 1.11%, respectively.

Nikkei Index Gains Despite Rate Hike Bets

The Nikkei Index advanced by 0.58% on Friday morning. Hopes of a US soft landing offset the usual effects of a weaker USD/JPY on Nikkei Index-listed stocks.

Tokyo Electron Ltd. (8035) and Softbank Group Corp. (9984) advanced by 0.58% and 2.50%, respectively, while Nissan Corp. (7201) gained 1.31%.

ASX 200 Rises on Commodity Prices and Retail Sales

The ASX 200 Index was up 0.44% on Friday morning. Oil and gold stocks led broad-based gains.

Gold-related stock Northern Star Resources Ltd. (NST) rallied by 1.10% after gold prices advanced by 0.66% on Thursday. Oil-related stock Woodside Energy Group (WDS) rallied 2.55% as oil prices jumped on reports of production cuts in Iraq.

Investors should remain alert, with central bank commentary pivotal as the US Personal Income and Outlays Report looms. 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 manage positions across the Asian equity markets.