Hang Seng Tech Stocks Surge as Nikkei 225 Rallies on Yen Weakness

US Markets Balance Labor Data Optimism and Bitcoin Weakness

Global markets balanced optimism and caution as US economic data took the spotlight. Here’s a breakdown of Thursday, December 26, in US equity markets.

US equity markets had a mixed session as investors returned from the holidays. The Nasdaq Composite Index and the S&P 500 posted modest losses of 0.05% and 0.04%, respectively. In contrast, the Dow gained 0.07%.

US labor market data and bitcoin (BTC) price trends weighed on the Nasdaq. Crypto-related stock MicroStrategy (MSTR) slid by 4.78% as BTC continued to retreat from the December 17 all-time high of $108,231.

US Jobless Claims Reflect a Resilient Labor Market

On Thursday, US initial jobless claims unexpectedly dropped from 220k (week ending December 14) to 219k (week ending December 21). Economists predicted an increase to 224k. The claims data underscored a robust US labor market, supporting the Fed’s less dovish rate path outlook.

Tight labor market conditions can drive wage growth, fueling consumer spending and demand-driven inflation. A higher-for-longer rate path to tackle inflation could weigh on capital-intensive companies through increased borrowing costs.

Tokyo Inflation and Retail Sales Challenge the BoJ

On Friday, December 27, economic indicators from Japan influenced the USD/JPY pair.

Tokyo’s core inflation rate rose from 2.2% in November to 2.4% in December, exceeding the BoJ’s 2% target. A higher inflation rate could pressure the BoJ into a Q1 2025 rate hike.

Meanwhile, retail sales jumped by 1.8% month-on-month in November after falling 0.2% in October. Upward trends in consumer spending could fuel inflationary pressures, also supporting a more hawkish BoJ rate path.

Notably, the USD/JPY reacted to the data, falling 0.21% to 157.594. However, BoJ Governor Kazuo Ueda weighed on Japanese Yen demand during the holidays, driving the USD/JPY to 158 and boosting demand for Nikkei Index-listed stocks.

On Wednesday, Governor Ueda stated that future rate hikes would depend on economic activity, financial conditions, and prices. His comments contrasted with the Bank of Japan’s Summary of Opinions that suggested a rate hike was approaching.

Hang Seng Index Gains on Stronger China Data

In Asian markets, the Hang Seng Index gained 0.39% on Friday morning. China’s industrial profits declined by 4.7% year-to-date in November compared with the same period in 2023, beating expectations for a 5.0% drop. The better-than-expected numbers provided early support.

Tech stocks benefitted from the data, with the Hang Seng Tech Index advancing by 1.38%. However, the real estate sector capped the morning gains, with the Hang Seng Mainland Properties Index falling 1.75%.

Mainland China markets had a mixed start to the Friday session. The CSI 300 declined by 0.16%, while the Shanghai Composite edged 0.06% higher.

Concerns about Trump’s policies, including tariffs and a less dovish Fed rate path, posed headwinds as 2024 drew nearer to a close.

Nikkei Index Rallies Amid Yen Weakness

Japan’s Nikkei Index rallied 1.16% on Friday morning as the USD/JPY revisited its July levels of 158 on Thursday.

Tech stocks had a positive morning. Tokyo Electron (8035) and Softbank Group (9984) rose 1.17% and 0.76%, respectively. Sony Corp. (6758) advanced by 1.67%. However, Nissan Motor Corp. (7201) tumbled 6.35% amid uncertainty about a potential merger with Honda Motor Corp. (7267).

ASX 200 Sees Broad-Based Sector Gains

Meanwhile, Australia’s ASX 200 Index eyed a three-day winning streak, advancing by 0.45%. Gains spanned banking, gold, mining, oil, and tech sectors.

Notably, the S&P/ASX All Technology Index was up 0.92%, while Northern Star Resources Ltd. (NST) gained 0.45%, benefiting from gold’s overnight price gains.

Outlook

Thin holiday trading could prolong volatility. However, key events, including private sector PMI releases, updates on Beijing’s stimulus measures, and US tariff developments, require consideration.

Weaker PMI data from China, US tariff threats, and Beijing’s silence in stimulus could weigh on riskier assets. Traders should closely monitor global economic trends and trade dynamics to navigate shifting market conditions.

For in-depth analysis of the Hang Seng Index and global market trends, click here.