Hang Seng Index: Stimulus Hopes and Fed Rate Cut Bets Lift Tech Stocks

US Markets: How Did the US CPI Report Impact Stocks?

Here’s what US equity markets revealed on Wednesday, December 11.

US equity markets had a mixed mid-week session. The Nasdaq Composite Index rallied 1.77%, with the S&P 500 advancing by 0.82%. However, the Dow extended its losing streak to five sessions, dropping by 0.22%.

The US CPI Report cemented expectations of a December Fed rate cut, thereby boosting demand for tech stocks due to their sensitivity to interest rates. Tesla Inc. (TSLA) surged 5.93%, while Arm Holdings (ARM) rallied 4.28%. Lower interest rates may reduce borrowing costs, improving profits and stock prices for capital-intensive companies.

US CPI Report Solidifies December Fed Rate Cut Bets

The US annual inflation rate rose from 2.6% in October to 2.7% in November, while core inflation remained at 3.3%. November’s data aligned with market consensus, boosting bets on a December 25-basis point Fed rate cut.

According to the CME FedWatch Tool, the chances of a 25-basis point December Fed rate cut jumped from 88.9% on December 10 to 98.4% on December 11, underscoring the influence of the CPI Report on the Fed rate path.

Market expectations for a December Fed rate cut set a positive tone for the Thursday Asian market session.

Aussie Labor Market Test RBA Rate Cut Bets

In Australia, labor market data tempered bets on a Q1 2025 RBA rate cut. Australia’s unemployment rate fell from 4.1% in October to 3.9% in November, surprising investors. Tighter labor market conditions could boost wages, fueling consumer spending and demand-driven inflation.

Falling bets on a Q1 2025 RBA rate cut could weigh on rate-sensitive ASX 200-listed stocks, particularly in the financial and real estate sectors.

AMP Head of Investment Strategy and Chief Economist Shane Oliver commented on the labor market data, saying,

“Aust Nov jobs +35.6k with unemployment falling to 3.9% as participation fell. On its own this argues against a Feb rate cut, so we stick to May for now but its hard to square with weak GDP so could reverse in Dec.Given weak GDP & falling infl we still see a hi chance of a Feb cut.”

China’s Central Economic Work Conference: Day Two

Meanwhile, the second day of China’s two-day Central Economic Work Conference got underway on Thursday morning. President Xi Jinping and senior policymakers are expected to draw stimulus plans for 2025 to bolster the Chinese economy.

On Monday, investors gained insights into potential policy maneuvers after the Politburo announced intentions to loosen monetary policy and introduce fresh fiscal stimulus measures. The stimulus measures would target domestic consumption and broad-based demand.

The announcement underscored Beijing’s determination to bolster the economy as potential US tariffs loom. US President-elect Donald Trump recently warned of 10% tariffs on Chinese goods.

On Wednesday, Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on China’s economy and potential policy measures, saying,

“As there will not be so much support from #exports next year, China will need to introduce some consumption-based stimulus in 2025 to meet an estimated around 4.5 percent GDP growth. If there is no stimulus, the growth could be between 4.1 and 4.2 percent.”

If implemented, stimulus measures targeting consumption could ease concerns about the effect of potential US tariffs on China’s economy. Improving optimism toward the economy may boost demand for Hong Kong and Mainland China stocks.

Hang Seng Index Advances as Stimulus Hopes Linger

In Asian markets, the Hang Seng Index advanced by 0.29% on Thursday morning. Rising bets on a December Fed rate cut drove demand for Hang Seng Index-listed tech stocks, while real estate stocks struggled, pending stimulus news.

The Hang Seng TECH Index gained 0.29%, with tech giants Baidu (9888) and Tencent (0700) rallying 1.70% and 1.20%, respectively. However, the Hang Seng Mainland Properties Index dropped by 0.25%.

Mainland China markets posted morning gains, with the CSI 300 and the Shanghai Composite up 0.30% and 0.22%, respectively.

Nikkei Rallies on Fed Rate Cut Bets

Japan’s Nikkei Index rallied 1.31% on Thursday morning, supported by Fed rate cut expectations and a weaker yen boosting export stocks. On Wednesday, USD/JPY returned to the 152 level. A weaker Japanese Yen would increase demand for Japanese goods and boost earnings from abroad, potentially increasing company profits.

Softbank Group Ltd (9984) and Tokyo Electron (8035) saw gains of 1.94% and 0.59%, respectively. Sony Corp (6758) rallied 2.62%.

ASX 200 Falls, Mirroring the Dow

Meanwhile, Australia’s ASX 200 Index faces a three-day losing streak, falling 0.29% in the morning session. Falling bets on a Q1 RBA rate cut overshadowed sentiment toward the Fed rate path. Banking, mining, and gold-related stocks countered oil and tech stock gains.

Westpac Banking Corp. (WBC) dropped 0.30%. 10-year US Treasury yields climbed on Wednesday and trended higher on Thursday, impacting demand for high-yielding Aussie bank stocks.

Iron ore prices extended their drop on Wednesday due to concerns over slowing Chinese demand. The drop in iron ore prices added pressure on mining giants like BHP Group Ltd. (BHP) and Rio Tinto Ltd. (Rio).

Outlook

Market sentiment remains sensitive to China’s economic stimulus announcements and global central bank policies. Investor focus will be on Fed, RBA, and BoJ, signals alongside developments from China’s Central Economic Work Conference.

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