Hang Seng Index Rises as China’s Manufacturing PMI Sparks Optimism

US Markets: Earnings and Economic Data Impact

On Thursday, October 31, US equity markets faced heavy selling pressure, extending their losses from Wednesday. The Nasdaq Composite Index slid by 2.76%, while the Dow and the S&P 500 saw declines of 0.90% and 1.86%, respectively.

Microsoft (MSFT) and Meta Platforms (META) pulled the US equity markets into negative territory after their earnings reports and forecasts. Notably, Microsoft ended the session down 6.05%, while Meta dropped by 4.09%.

US Personal Income and Outlays Report Reduces Bets on a December Fed Rate Cut

On Thursday, the Personal Income and Outlays Report reduced expectations for a 25-basis point December Fed rate cut.

The Core PCE Price Index increased by 2.7% year-on-year in October, mirroring September’s rise. Additionally, personal spending rose by 0.5% month-on-month in October, up from 0.3% in September. A pickup in personal spending could fuel demand-driven inflation, potentially delaying a December rate cut until 2025.

According to the CME FedWatch Tool, the probability of a 25-basis point December Fed rate cut eased from 72.2% on October 30 to 71.1% on October 31.

Thursday’s US session likely set the tone for the broader Asian Friday session.

China Manufacturing PMI Signals Return to Growth

On Friday, November 1, the crucial Caixin Manufacturing PMI drew interest. The PMI increased from 49.3 in September to 50.3 in October. The move above 50 signaled a return to expansion, boosting demand for HK and Mainland China-listed stocks.

Expert Views on China’s Manufacturing Sector and Policy Measures

Dr. Wang Zhe, Senior Economist at Caixin Insight Group, commented on the October Survey, stating,

“In late September, China’s Politburo noted emerging challenges in the economy and emphasized the need to focus on key areas and introduce new policies. Following this, a series of new policies were rolled out. Data from the Caixin manufacturing PMI survey show that market demand stabilized and optimism improved, suggesting early signs of policy impact.”

Dr. Wang Zhe added,

“However, the labor market remains under pressure, and price levels are still subdued. The effectiveness of these new policies in improving domestic demand, employment and livelihoods will require close monitoring. Additionally, achieving China’s 2024 growth target will depend on a sustained recovery in consumer demand. That means policy efforts should focus on increasing household disposable income more effectively.”

Hang Seng and Mainland China Equities React to Manufacturing PMI

In Asian markets, the Hang Seng Index gained 0.80% on Friday morning. Investors responded to the pickup in China’s manufacturing sector activity, countering sentiment toward the Fed rate path.

The Hang Seng Mainland Properties Index advanced by 1.44%, contributing to the gains. However, it was a mixed morning session for the tech sector. Baidu (9888) and Alibaba (9988) saw losses of 0.90% and 0.11%, while Tencent (0700) rallied 2.09%.

Mainland China’s equity markets also advanced on the latest PMIs and hopes for fresh policy measures from Beijing. The CSI 300 and the Shanghai Composite gained 0.62% and 0.17%, respectively.

Nikkei Slides on Yen Strength and Nasdaq Decline

In Japan, the Nikkei Index slid by 2.16% on Friday morning, pressured by a stronger Japanese Yen. The USD/JPY declined by 0.90% on Thursday, impacting demand for Nikkei Index-listed stocks. Tech stocks also saw heavy losses following the Nasdaq’s pullback.

Key movers included SoftBank Group Corp. (9984) and Tokyo Electron (8035), which tumbled by 5.30% and 3.48%, respectively. Nissan Motor Corp. (7201) was down 1.80%.

ASX 200 Eyes Three-Day Losing Streak

The ASX 200 Index declined by 0.93% on Friday morning. Banking, gold, and tech stocks contributed to the losses.

National Australia Bank (NAB) slid by 1.96%, while Westpac Banking Corp. (WBC) declined by 1.45%. Falling bets on a December Fed rate cut left 10-year Treasury yields elevated, impacting demand for high-yielding Aussie bank stocks.

Northern Star Resources Ltd. (NST) declined by 1.92% on Thursday’s slide in gold spot prices.

However, mining giants BHP Group Ltd (BHP) and Rio Tinto Ltd (RIO) advanced by 0.04% and 1.02%, respectively. Iron ore spot prices advanced on Friday morning on China’s PMI numbers, boosting demand for mining stocks.

Looking Ahead

Looking ahead, investors should watch the RBA interest rate decision, the US Presidential Election, and the upcoming National People’s Congress Standing Committee (NPCSC) meeting will impact market risk sentiment.

Stimulus measures from Beijing could boost demand for riskier assets. However, hawkish central bank stances and a Trump victory could overshadow Beijing’s policy news. Stay informed with our latest news and analysis to manage your risks effectively.