Hang Seng Index: Weak China Data Weighs on Markets Amid Stimulus Hopes

US Markets: Nasdaq and S&P End the Week on a High Note

How did the US markets prevail, and will the US CPI Report test market optimism? Here’s what US equity markets revealed.

US equity markets had a mixed Friday after the previous session’s losses. The Nasdaq Composite Index and the S&P 500 closed the week at record closing highs, advancing by 0.81% and 0.25%, respectively. However, the Dow trended lower, declining by 0.28%.

Rising bets on a December Fed rate cut fueled demand for rate-sensitive tech stocks.

US Jobs Report Boosts Rate Cut Bets

Friday’s US Jobs Report fueled speculation about a 25-basis point December Fed rate cut. The unemployment rate rose from 4.1% in October to 4.2% in November, while the participation rate unexpectedly dropped to 62.5% in November.

These signals of rising unemployment suggested a slower wage growth outlook, potentially dampening consumer spending and inflation. A weaker inflation outlook would support a more dovish Fed rate path.

According to the CME FedWatch Tool, the probability of a 25-basis point December cut increased from 71.8% on December 5 to 86.0% on December 6.

China’s Inflation Data Sends Mixed Signals

On Monday, December 9, inflation figures from China influenced demand for riskier assets. China’s annual inflation rate unexpectedly eased from 0.3% in October to 0.2% in November. Softer inflation indicates weaker domestic demand.

However, producer prices, a leading inflation indicator, declined by 2.5% year-on-year in November, improving from a 2.9% fall in October. Rising producer price trends suggest a potential pickup in demand. Producers raise prices on a higher appetite for goods, passing costs onto consumers.

East Asia Econ, a research service run by Paul Cavey focusing on China, Japan, Korea, and Taiwan, commented on the inflation numbers, stating,

“China – CPI details a bit better than headlines. After falling for most of the year, core CPI rose MoM in November. However, the impact on overall CPI was offset by a renewed softening of food prices, and PPI also remained in deflation. PPI will likely strengthen a bit more from here, but overall, deflation is still the bigger risk than inflation.”

November’s inflation figures underscored the importance of this week’s Central Economic Work Conference. Investors anticipate stimulus measures to boost domestic consumption and bolster the real estate market.

Hang Seng Index Dips on Weak China Data

In Asian markets, the Hang Seng Index declined by 0.49% on Monday morning. China’s inflation figures overshadowed optimism toward fresh stimulus measures from Beijing. Real estate and tech stocks weighed on the Hang Seng Index.

The Hang Seng Tech Index fell by 0.23%, with tech giants Alibaba (9988) and Tencent (0700) declining by 0.88% and 0.85%, respectively. The Hang Seng Mainland Properties Index slid by 1.04%.

Mainland China’s equity markets also struggled. The CSI 300 and the Shanghai Composite were down by 0.51% and 0.40%, respectively, giving up earlier gains. Hopes of fresh stimulus measures from Beijing likely contributed to the earlier gains.

Nikkei Rises on Yen Weakness

In Japan, the Nikkei Index bucked the trend on Monday, gaining 0.24%. Japan’s finalized Q3 2024 GDP numbers potentially dampened expectations for a December Bank of Japan rate hike. Japan’s economy unexpectedly contracted by 0.1% in Q3 2024 after expanding by 0.7% in Q2 2024.

The USD/JPY revisited the 150 level in the morning session, supporting demand for Nikkei Index-listed export stocks. A weaker Yen could potentially improve overseas earnings and stock prices.

Tech stock giant Softbank Group Corp. (9984) rallied 2.08%, while Sony Corp. (6758) and Nissan Motor Corp. (7201) advanced by 1.88% and 0.46%, respectively.

ASX 200 Feels China’s Inflation Pain

Meanwhile, Australia’s ASX 200 Index dropped by 0.28% on Monday morning. Banking, mining, and oil-related stocks declined. China’s soft inflation figures fueled concerns about commodity demand.

Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) declined by 0.42% and 0.54%, respectively. Iron ore futures slipped by 0.12% in the morning.

Woodside Energy Group Ltd. (WDS) fell 1.37% on Friday’s pullback in oil prices.

Meanwhile, ANZ tumbled 3.05% on news of CEO Shayne Elliot’s retirement plans, fueling uncertainty about his replacement.

Outlook

Market sentiment remains sensitive to updates from Beijing and global central banks. Positive stimulus signals from China could reignite risk appetite, but the Fed, RBA, and BoJ rate policies will continue influencing investor decisions.

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