Hang Seng Index Slips on China Data as US Stocks Rally on Fed Rate Cut Bets

US Equity Markets Extend Their Gains from Thursday

On Friday, September 13, the US equity markets continued their upward trend from Thursday. The Dow and the Nasdaq Composite Index saw gains of 0.72% and 0.65%, respectively, while the S&P 500 advanced by 0.54%.

US Consumer Sentiment Beats Expectations

On Friday, the Michigan Consumer Sentiment Index increased from 67.9 in August to 69.0 in September, easing concerns about a possible US recession.

Upward trends in consumer confidence may indicate a boost in private consumption, which accounts for over 60% of the US economy. Meanwhile, the Michigan Inflation Expectations Index unexpectedly declined, raising bets on a September 50-basis point Fed rate cut.

Easing fears of a US recession and increasing expectations of a 50-basis point Fed rate cut bolstered riskier assets. According to the CME FedWatch Tool, the probability of a 50-basis point September Fed rate cut increased from 30%, on September 6, to 59.0% on Monday, September 16.

Despite the positive US economic data and equity market gains, data from China may influence risk sentiment.

China’s Economic Indicators Fuel Concerns About Growth

On Saturday, September 14, Chinese economic data raised doubts about the country meeting its 5% growth target. House prices declined at a faster pace year-on-year in August. August also saw weaker growth in industrial production and softer retail sales. Rising unemployment suggested weakening domestic demand.

Expert Views on China’s Economy and Policy Outlook

On Sunday, September 15, AMP Head of Investment Strategy and Chief Economist Shane Oliver remarked on the China data, stating,

“Continuing soft Chinese (data) for Aug with grth in IP, retail sales & inv all slowing slightly more than exp & a continuing fall in property prices, inv & sales. Growth this yr looking more like ~4.5%. More policy stimulus is needed but likely to remain incremental.”

Hang Seng Index and Mainland China Equity Markets React

On Monday morning, the Hang Seng Index was down 0.54% as investors reacted to the disappointing data from China.

The real estate sector led the losses, with the Hang Seng Mainland Properties Index sliding by 3.59%. Tech stocks also struggled, as the Hang Seng Tech Index (HSTECH) declined by 0.79%. Notable movers included Alibaba (9988), down 1.51%, while Baidu (9888) and Tencent (0700) fell by 0.85% and 0.27%, respectively.

Mainland China equities trended lower, highlighting growing concerns about the economic outlook. The CSI 300 and the Shanghai Composite saw declines of 0.42% and 0.48%, respectively.

Nikkei Index Faces a Challenging Week

On Monday, the USD/JPY dropped 0.41% to 140.187, signaling possible headwinds for Nikkei Index-listed export stocks. A stronger Japanese Yen may adversely affect earnings for companies reliant on overseas revenue, possibly impacting their stock prices.

However, the Japanese markets were closed on Monday for Respect for the Aged Day holiday.

ASX 200 Eyes an All-time High Close

The ASX 200 Index advanced by 0.43% on Monday morning. If gains hold, it could close at an all-time high. Banking, gold, and tech stocks led the gains.

Northern Star Resources Ltd. (NST) gained 1.47% as Fed rate cut bets drove gold prices higher.

Westpac Banking Corp. (WBC) advanced by 1.60% as concerns over inflation eased and Fed rate cut bets increased. Australian banks, well known for high dividend yields, draw interest from yield-seeking investors as the markets consider a more dovish Fed rate path.

The S&P/ASX All Technology Index tracked the US tech sector gains from Friday, climbing by 0.25%.

Investors should remain alert as the Fed interest rate decision looms. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.