Hang Seng Index Rises, ASX Gains on China Data; US Fed Rate Cut Bets Weaken

US Markets: Falling Rate Cut Bets Impact Risk Sentiment

On Thursday, November 14, US equity markets ended the session in negative territory. The Nasdaq Composite Index extended its losses from Wednesday, dropping 0.64%, while the Dow and the S&P 500 declined by 0.47% and 0.61%, respectively.

Overnight US economic indicators reduced investor bets on a December Fed rate cut, impacting demand for riskier assets.

US Economic Indicators and the Fed Rate Path

US producer prices increased by 2.4% year-on-year in October, up from 1.9% in September. As a leading inflation indicator, the sharp upswing in producer prices signaled higher inflation, dampening expectations for a December Fed rate cut.

US jobless claims also reduced bets on a December Fed rate cut, falling from 221k (week ending November 2) to 217k (week ending November 9).

Following October’s inflation data and jobless claims, Fed Chair Powell also issued a warning, stating that the Fed would tread cautiously regarding monetary policy until there was greater clarity.

The CME FedWatch Tool highlighted the significance of the data and Powell’s comments on market sentiment toward the Fed rate. The chances of a 25-basis point Fed rate cut fell from 82.5% on November 13 to 58.9% on November 14.

China’s Mixed Economic Signals

On Friday, November 15, crucial economic indicators from China impacted market risk sentiment. Significantly, retail sales, industrial production, and unemployment figures gave investors insights into the effectiveness of Beijing’s recent stimulus measures to bolster the economy.

Retail sales and unemployment suggest improved domestic demand. However, lackluster production numbers indicate ongoing challenges, partly due to looming US tariffs.

Expert Views on China’s Economic Indicators and Stimulus

AMP Head of Investor Strategy and Chief Economist Shane Oliver commented on Friday’s data, stating,

“Chinese Oct data was on balance slightly better than expected. Growth in inv was flat at 3.4% yoy, IP was softer than exp., but retail sales accelerated more than exp to 4.8% yoy. Prop-related data remained weak with investment, sales, and home prices continuing to fall.”

Hang Seng Advances on China Economic Data Trends

In Asian markets, the Hang Seng Index advanced by 0.70% on Friday. Investors reacted positively to better-than-expected retail sales and unemployment data from China. However, the Hang Seng eased back from early highs amid ongoing concerns about US tariffs on China.

Real estate and tech stocks steadied after Thursday’s sharp pullback. The Hang Seng Mainland Properties Index increased by 0.18%, while the Hang Seng Tech Index rallied by 1.05%. Among the tech giants, Baidu (9888) jumped 1.98%.

Meanwhile, Mainland China’s equity markets had a mixed morning, with the CSI 300 down by 0.13%, while the Shanghai Composite gained 0.06%.

Nikkei Rallies as the Japanese Yen Weakens

Japan’s Nikkei Index rallied 0.78% on Friday morning, fueled by the USD/JPY’s four-day winning streak and return to the 156 level. Japan’s GDP numbers bolstered demand for the USD/JPY pair during the Friday morning session, with investors expecting the BoJ to maintain interest rates in December.

Japan’s economy expanded by 0.2% quarter-on-quarter in Q3 2024 after growing by 0.5% in Q2 2024.

Nissan Motor Corp. (7201) jumped by 4.71%, while Sony Corp. (6758) gained 1.41%, with overseas sales benefiting from the weaker Yen. Tech stocks also advanced, with Softbank Group Corp. (9984) and Tokyo Electron (8035) posting gains.

ASX 200 Advances on China Data

The ASX 200 Index extended its gains from Thursday, rising 0.42% on Friday morning. Banking, gold, oil, and tech-related stocks contributed to the gains, countering a mixed session for mining stocks. The S&P/ASX 200 Technology Index gained 0.62% in the morning session.

Risk-on-sentiment drove demand for high-yielding Aussie bank stocks, with ANZ (ANZ) and Westpac Banking Corp. (WBC) up 1.34% and 1.11%, respectively.

Looking Ahead

Investors should consider stimulus-related news from Beijing after China’s economic data releases. Policy measures targeting consumer demand may fuel demand for riskier assets. Investors should also consider central bank commentary, with the USD/JPY hovering within the intervention zone. Stay informed on upcoming central bank statements and market data releases for detailed insights.