Hang Seng Index Slumps 3.38%, Nikkei 225 Rallies Amid Japan’s PMI and USD/JPY Gains

US Equity Markets Tread Cautiously

The global markets shift on renewed Fed rate speculation and labor data surprises. On Wednesday, October 2, the US equity markets avoided a second consecutive day of losses. Nevertheless, the gains were modest, with the Dow and the Nasdaq Composite Index gaining 0.09% and 0.08%, respectively. The S&P 500 ended the session up 0.01%.

Investors were more cautious midweek, with the Middle East conflict and the US economic calendar in focus.

US Labor Market Data Impact Fed Rate Path

Overnight, the ADP employment change report reduced expectations of a 50-basis point November Fed rate cut. According to the ADP Report, employment increased by 143k in September, up from 103k in August. The ADP Report precedes Friday’s crucial US Jobs Report.

According to the CME FedWatch Tool, the chances of a 50-basis point November rate cut fell from 36.8% (October 1) to 34.6% (October 2). 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

Andrea Lisi, founder of Lisi Quant Analysis, commented on recent US labor market data, stating,

“The week started well yesterday with a better-than-expected JOLTs report, and today, it’s the turn of the ADP Employment Change, which also came in hot at 143K versus the consensus forecast of 120K. The ADP Report better reflects reality than the government employment report, which Department of Labor constantly revisits down.“

Japan’s Services PMI Dampens Yen Outlook

Japan’s finalized Jibun Bank Services PMI drew investor interest on Thursday, October 3. The Services PMI dropped from 53.7 in August to 53.1 in September, down from a preliminary 53.9. A softer print tempered bets on a Q4 2024 Bank of Japan rate hike, impacting demand for the Japanese Yen. The pullback in the Yen boosted the appetite for Nikkei Index-listed stocks.

On Thursday, the USD/JPY was up by 0.30% to 146.893, consolidating the previous session’s 2.03% surge. Japan’s new Prime Minister Shigeru Ishiba, reportedly said that the nation was not ready for further rate hikes after a meeting with BoJ governor Kazuo Ueda, sinking the Japanese Yen.

Hang Seng Index Falls on Profit-Taking

On Thursday, the Hang Seng Index was down 3.38%. Profit-taking likely contributed to the morning losses as investors considered the upbeat US labor market data. Real estate and tech stocks were the primary contributors to the decline.

The Hang Seng Mainland Properties Index (HMPI) tumbled by 7.71%. Shimao Group Holdings Ltd. (0813) slumped by 30.6%, while Longfor Group Holdings Ltd. (0960) slid by 13.0%.

Meanwhile, the Hang Seng Tech Index (HSTECH) slid by 6.06%. Baidu (9888) and Alibaba (9988) were down by 6.16% and 6.26%, respectively. Tencent (0700) fell by a more modest 3.08%.

Mainland China’s markets remained closed on Thursday for the National Holidays.

Nikkei Index Gains on Yen Weakness

Meanwhile, the Nikkei 225 rallied 2.10% on a weaker Yen and falling expectations of a Q4 2024 BoJ rate hike.

Notably, Tokyo Electron (8035) advanced by 3.29%, while Softbank Group Corp. (9984) and Sony Corp. (6758) saw gains of 2.97% and 1.35%, respectively. Nissan Motor Corp. was up by 2.23%.

ASX 200 Sees Mining Stocks Counter Banking Sector Losses

The ASX 200 Index rose by a modest 0.04% on Thursday morning. Mining sector stocks countered banking sector losses, with gold and oil stocks also retreating.

Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) saw gains of 0.69% and 0.21%, respectively. Iron ore futures advanced on Wednesday and continued to trend higher on Thursday, fueling demand for mining stocks.

However, falling bets on a 50-basis point Fed rate cut impacted demand for Aussie bank stocks. Westpac Banking Corp. (WBC) slid by 1.00%, while ANZ (ANZ) declined by 0.37%. Investors had targeted Aussie bank stocks, known for higher dividend yields, in anticipation of a more dovish Fed rate path.

Investors should stay alert with the focus remaining 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.