Hang Seng Index: Rises 1.89% as Investor Sentiment Defies US Losses

US Equity Markets Slip on Geopolitical Risk

On Thursday, October 3, the US equity markets recorded losses amid rising tensions in the Middle East. The Dow declined by 0.44%, while the Nasdaq Composite Index and the S&P 500 saw losses of 0.04% and 0.17%, respectively.

Reports of discussions between the US and Israel regarding a potential strike on Iranian oil targets have impacted demand for riskier assets. Notably, WTI oil prices surged above $73 as fears of a further escalation in the conflict intensified.

The overnight losses and risk-off sentiment set the tone for the Friday Asian session.

US Services PMI and Job Less Claims in Focus

US economic indicators also influenced market risk sentiment on Thursday. The ISM Services PMI jumped from 51.5 in August to 54.9 in September, easing expectations of aggressive Fed rate cuts to bolster the economy.

Furthermore, initial jobless claims increased slightly from 219k (week ending September 21) to 225k (week ending September 28). Despite rising, the jobless claims continued to signal a resilient US labor market, impacting the Fed rate path.

According to the CME FedWatch Tool, the probability of a 50-basis point November rate cut fell from 35.2% (October 2) to 32.8% (October 3). A less dovish Fed rate path could leave borrowing rates higher than expected, possibly impacting demand for riskier assets.

Expert Views on the US Labor Market

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, reacted to the jobless claims data, stating,

“US initial jobless claims +6k, continuing claims -1k. Continues to suggest that the labour market remains resilient – although others jobs data is less positive.”

Middle East Tensions and the Looming US Jobs Report

Concerns about a possible Israeli strike on Iranian oil facilities impacted market risk sentiment. WTI oil advanced by a further 0.14% to $73.81 on Friday morning.

Investors also need to consider today’s US Jobs Report. Upbeat US labor market data could further reduce expectations of a 50-basis point November Fed rate cut. Conversely, weak numbers could reignite fears of a hard US economic landing, which may negatively impact the markets.

Hang Seng Index Climbs Ahead of China Reopen

The Hang Seng Index advanced by 1.89% during Friday’s morning session. Investors brushed aside the overnight losses across the US markets. Expectations of Beijing’s recent policy measures boosting the Chinese economy drove buyer demand for HK-listed stocks.

Real estate and tech stocks were among the top gainers. The Hang Seng Mainland Properties Index (HMPI) gained 2.82%. Shimao Group Holdings Ltd. (0813) rallied 13%, while Longfor Group Holdings Ltd. (0960) rose by a more modest 3.3%.

Meanwhile, the Hang Seng Tech Index (HSTECH) was up by 2.82%. Alibaba (9988) and Tencent (0700) saw gains of 1.36% and 2.26%, respectively, while JD.com (9618) rallied 6.40%.

Mainland China’s markets remained closed on Friday for the National Holidays, but, in the futures market, the FTSE China A50 was up 195 points.

Nikkei Index Edges Higher on Policy Pivot

Meanwhile, the Nikkei 225 advanced by 0.24%. On Thursday, the USD/JPY pair advanced by 0.33% to 146.927. Notably, the USD/JPY briefly revisited 147.240 as expectations of a Q4 2024 Bank of Japan rate hike faded.

Notably, Fast Retailing Co. Ltd. (9983) rallied 1.59%, while Softbank Group Corp. (9984) and Sony Corp. (6758) saw gains of 0.14% and 0.16%, respectively.

ASX 200 Slides as Mining Stocks Hit Reverse

The ASX 200 Index slid by 0.90% on Friday morning. Banking and mining sector stocks countered gold and oil stocks gains.

Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) were down by 2.39% and 2.52%, respectively. Mining stocks hit reverse despite a modest increase in Iron ore futures on Thursday. Profit-taking likely impacted stock price trends after Thursday’s HK market sell-off.

Westpac Banking Corp. (WBC) tumbled by 1.76%, while ANZ (ANZ) slid by 1.63%. Aussie bank stocks, known for higher dividend yields, see increased demand during periods of monetary policy easing. However, fading expectations on a 50-basis point Fed rate cut affected demand for Aussie bank stocks.

Investors should remain alert, focusing on the central banks, the US Jobs Report, and the Middle East. Closely monitor news wires, real-time data, and expert commentary to adjust your trading strategies accordingly. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.