Hang Seng Index, ASX200, Nikkei 225:  China PMI and Debt Deal Relief

Key Insights:

• It was a bullish Thursday morning, with the Hang Seng Index leading the ASX 200 and Nikkei Index.
• Investors brushed aside a bearish US session on Wednesday, with China stats and a US debt ceiling vote changing the narrative.
• Economic indicators from Japan and Australia were also bullish.

Market Overview

It was a bullish start to the Thursday session for the Asian markets. The Hang Seng Index led the ASX 200 and the Nikkei as investors responded to economic indicators from China and news from Washington.

Better-than-expected US job openings and easing bets on a Fed interest rate hike in June were also bullish.

US Job openings increased from 9.745 million to 10.103 million in April versus a forecasted 9.775 million.

Despite the job opening numbers, the talk of hitting the pause button in June to allow the FOMC to digest economic indicators led to the markets taking off bets on a June interest rate hike.

According to the CME FedWatch Tool, the chances of a 25-basis point interest rate hike tumbled from 66.6 to 26.4% on Wednesday as the markets responded to Fed chatter that favored a June pause.

The NASDAQ Composite Index fell by 0.63%, with the Dow and S&P 500 seeing losses of 0.41% and 0.61%, respectively. The losses came despite a less hawkish Fed, with investor angst about the House of Representatives vote on the debt ceiling deal weighing.

However, sentiment shifted this morning, with economic indicators from China and news of US lawmakers voting in favor of the deal providing support.

China’s all-important Caixin Manufacturing PMI for May gave investors a better view of the macroeconomic environment midway through the second quarter. The all-important Caixin Manufacturing PMI increased from 49.5 to 50.9 in May versus a forecasted 50.3.

ASX 200

The ASX 200 was up by 0.24%, with bank and mining stocks providing support. While the China PMI numbers were bullish, private new capital expenditure was also market-friendly. Private new capital expenditure increased 2.4% in Q1 versus a forecasted 1.3% rise. In Q4, private new capital expenditure increased by 3.0%.

The big-4 had a mixed morning. The National Australia Bank (NAB) was up 0.54%, with The Commonwealth Bank of Australia (CBA) and Westpac Banking Corp (WBC) seeing gains of 0.03% and 0.15%, respectively. However, ANZ Group (ANZ) bucked the trend, falling by 0.26%.

Mining stocks also found support. Rio Tinto (RIO) and BHP Group Ltd (BHP) were up by 0.12% and 0.07%, respectively, with Fortescue Metals Group (FMG) rising by 0.16%. Newcrest Mining (NCM) rallied 3.08%.

Oil stocks had a mixed morning. Woodside Energy Group (WDS) fell by 0.70%, while Santos Ltd (STO) gained 0.14%. Brent Crude was down 1.20% to $72.66 this morning.

Hang Seng Index

The Hang Seng was up 0.99% this morning. The China PMI numbers and easing bets of a June Fed rate hike provided support.

Considering the main components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) saw gains of 3.09% and 1.41%, respectively.

However, bank stocks had a bearish morning session. HSBC Holdings PLC fell by 0.61%, with the Industrial and Commercial Bank of China (HK:1398) and China Construction Bank (HK: 0939) seeing losses of 0.24% and 0.20%, respectively.

CNOOC (HK: 0883) rose by 0.17%.

Nikkei 225

The Nikkei 225 was up 0.85% this morning, with capital expenditure jumping by 11.0% in Q1 year-over-year versus a forecasted 5.5% increase. In Q4, capital spending increased by 7.7%.

Sumitomo Mitsui Financial Group (8316) fell by 0.37%, while Mitsubishi UFJ Financial Group rose by 1.76%.

Looking at the main components, SoftBank Group Corp. (9984) rallied 4.93%, with Sony Corp (6758) rising by 1.48%. Tokyo Electron Limited (8035) and KDDI Corp (9433) were up by 0.39% and 0.96%, respectively. However, Fast Retailing Co (9983) fell by 0.34%.

Check out our economic calendar for economic events.