On Tuesday, the Nikkei 225 and the Hang Seng Index underperformed the ASX 200 as the Asian equity markets reversed course.
Fed Fear Resurfaced Overnight
Fed fear resurfaced overnight on Monday, leaving the US equity markets with modest gains. After sweeping bets on the Fed ending its rate hike cycle and cutting rates in June 2024, caution resurfaced before a swathe of central bank speeches. A recent pullback in 10-year US Treasury yields from 5% may have spooked investors.
On Monday, the US equity markets ended the day with modest gains. The Nasdaq Composite Index rose by 0.30%, while the S&P 500 and the Dow gained 0.18% and 0.10%, respectively.
The modest overnight gains left the Asian economic calendar to influence market risk appetite on Tuesday.
RBA Raises Cash Rate, Aussie Dollar Sinks
On Tuesday, the RBA raised the cash rate by 25 basis points to 4.35%. However, a lack of commitment to lift rates higher in December and early 2024 sank the Aussie dollar. The ASX 200 recovered from heavy losses to end the session with a modest loss.
Nonetheless, Fed policy uncertainty and China exports weighed on the Hang Seng Index and the Nikkei despite a surge in Chinese imports. A larger-than-expected fall in exports sent mixed signals on demand and productivity.
FOMC Member Speeches to Set the Tone
Fed speakers from the US session on Tuesday will likely set the tone for the Wednesday session. After the Monday retreat, sentiment toward the Fed interest rate path remains the focal point for the Asian markets.
10-year US Treasury yields retreated on Tuesday, supporting the bets on the Fed ending its rate cycle and the US equity markets. The US equity market gains came despite Fed speakers leaving rate hikes on the table on Tuesday. FOMC members Neel Kashkari, Austan Goldsbee, Michelle Bowman, and Christopher Waller delivered hawkish speeches.
The Dow and S&P 500 rose by 017% and 0.28%, with the Nasdaq Composite Index gaining by 0.90%.
On Wednesday, the Asian economic calendar is on the light side. However, the Reuters Tankan Index figures for November could influence Nikkei-listed stocks. The Index unexpectedly rose from 3 to 6. Economists forecast the Reuters Tankan Index to fall from 4 to 3 in November.
In the futures markets on Wednesday, the ASX 200 was down 1 point while the Nikkei was up 200 points.
ASX200 081123 Daily ChartThe ASX 200 declined by 0.29% on Tuesday, with the big four banks dragging the Index into negative territory.
Westpac Banking Corp. (WBC) tumbled by 2.69%, with the National Australia Bank Ltd. (NAB) and ANZ Group Holdings Ltd. (ANZ) seeing losses of 1.02% and 1.05%. The Commonwealth Bank of Australia (CBA) ended the session down 0.41%.
ANZ and NAB will also release earnings this week.
Mining stocks limited the losses, while oil stocks continued to fall. BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) gained 0.26% and 0.26%, respectively. Fortescue Metals Group Ltd. (FMG) rose by 0.60%.
Woodside Energy Group Ltd. (WDS) and Santos Ltd. (STO) ended the session down 0.62% and 0.81%, respectively.
Gold stocks had a positive Tuesday session. Evolution Mining Ltd. (EVN) and Northern Star Resources Ltd. (NST) gained 0.54 and 0.50%, respectively. However, Gold Spot was in negative territory during the Asian session.
Hang Seng Index
HSI 081123 Daily ChartThe Hang Seng Index slid by 1.65% on Tuesday. A larger-than-expected fall in China exports weighed on investor sentiment.
Alibaba (9988) and Tencent (0700) ended the Tuesday session down 2.00% and 1.28%, respectively.
Bank stocks had a mixed session on Tuesday. HSBC (0005) rose by 0.17%. However, China Construction Bank (0939) and the Industrial and Commercial Bank (1398) ended the day down 2.19% and 1.58%.
The Nikkei 225
Nikkei 081123 Daily Chart(Graph for reference purposes only)
The Nikkei 225 declined by 1.34% on Tuesday.
Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group (8306) fell by 0.71% and 0.75%. However, it was a mixed day for the main components of the Nikkei 225.
KIDDI Corp. (9433) slid by 1.93%. Tokyo Electron (8035) and Fast Retailing (9983) ended the session down 1.37% and 0.92%, respectively.
Sony Corp (6758) and Softbank (9984) bucked the trend, gaining 0.53% and 0.28%. Softbank releases earnings results on Wednesday.