Hang Seng Index Rises on China Stimulus Hopes; Nikkei Falls on Yen Strength

US Markets Mixed on US Labor Market Trends

US equity markets had a mixed Wednesday, January 8, session as investors digested US labor market data. The Nasdaq Composite Index slipped by 0.06%, while the Dow and S&P 500 posted gains of 0.25% and 0.16%, respectively.

In the bond market, 10-year US Treasury yields climbed to 4.730%, their highest since May 2024, reflecting sentiment toward the Fed rate path. A more hawkish Fed rate path may raise borrowing costs, potentially impacting company earnings and valuations.

Bitcoin (BTC) and the US BTC-spot ETF market reacted negatively to US labor market data, pressuring the Nasdaq. Crypto-related stocks MicroStrategy (MSTR) fell 2.85%, while Marathon Holdings (MARA) slid by 3.83%. BTC ended January 8 down 1.96% at $95,121.

US Labor Market Data Fuels Uncertainty

The US labor market sent mixed signals. Initial jobless claims fell unexpectedly from 211k (week ending December 28) to 201k (week ending January 4), its lowest since January 2024. A decline in jobless claims highlights labor market resilience, even as job creation slows.

However, the ADP reported private-sector jobs increased by 122k in December, falling short of a consensus 140k rise. December’s hiring was the weakest since August 2024.

Softer labor market conditions could curb wage growth, potentially dampening consumer spending and inflationary pressures. Conversely, a tighter labor market could boost consumption, delaying Fed rate cuts.

Uncertainty toward the Fed rate path weighed on risk sentiment early in Thursday’s Asian session.

China Inflation Raises Stimulus Expectations

Turning to the Asian economic calendar, China’s economy took center stage on Thursday, January 9. Softer inflation data fueled concerns about deflation and China’s economic outlook. The annual inflation rate dropped from 0.2% in November to 0.1% in December.

Producer prices fell 2.3% year-on-year in December, a slight improvement from November’s 2.5% drop, reflecting ongoing deflationary pressures. However, month-on-month, producer prices turned negative, highlighting deflationary risks. The data reinforced the need for stimulus measures targeting consumption and domestic demand.

Hang Seng Index Holds Steady on Stimulus Hopes

In Asian markets, the Hang Seng Index advanced by 0.09% on Thursday morning. Investors reacted to the overnight US market moves, China’s inflation data, and the prospects of more stimulus. Tech stocks advanced, with the Hang Seng Tech Index rising 0.17%. Tech giants Tencent (0700) rallied 1.49%, while Baidu (9888) declined by 0.94%.

Meanwhile, Mainland China markets trended lower amid economic uncertainties. The CSI 300 and Shanghai Composite saw declines of 0.05% and 0.29%, respectively.

Nikkei Slides Amid Intervention Warnings

On Thursday morning, Japan’s Nikkei Index slid by 1.41% amid intervention threats to stabilize the Japanese Yen. On Wednesday, Japan’s Finance Minister Katsunobu Kato reportedly raised concern about recent Yen trends.

The USD/JPY declined by 0.27% to 157.910 on Thursday, weighing on Japanese export stocks. A stronger yen could make Japanese exporters less competitive and affect overseas earnings.

Notable movers included Nissan Motor Corp (7201), which fell 3.98%. Tech stocks Tokyo Electron (8035) and Softbank (9984) dropped by 2.16% and 1.22%, respectively.

ASX 200 Declines as Retail Sales Jump

Australia’s ASX 200 Index fell 0.43% on Thursday morning, potentially ending a five-day winning streak. Retail sales increased by 0.8% month-on-month in November, weighing on demand for ASX 200-listed stocks. Rising retail sales could stoke inflationary pressures, potentially delaying an RBA rate cut.

Banking and tech stocks contributed to the losses. The S&P/ASX All Tech Index declined by 0.43%. The Commonwealth Bank of Australia (CBA) declined by 0.83%. A less dovish RBA rate path may curb credit demand, potentially affecting earnings for rate-sensitive companies.

However, gold and mining stocks limited the losses. Gold prices advanced overnight, while iron ore spot prices climbed on Thursday morning.

Outlook

Asian markets face a pivotal period as global economic and policy factors evolve:

• US-China Relations: Escalating trade tensions may strain regional economies, including Australia.
• US Labor Market Data: Continued strength could pressure rate-sensitive sectors.
• China’s Stimulus: Measures targeting domestic demand could offset weak global trade.

Trade tensions and monetary policy shifts continue to keep market sentiment fragile. Explore how these developments could impact your portfolio here.