Hang Seng Leads Asia Rally But Nikkei Slips on US Data Fears

MSCI's broadest index of Asia-Pacific shares outside Japan crept ahead on Tuesday.

Hong Kong’s Hang Seng led an Asian rally on Thursday, buoyed by optimism over China’s post-Covid recovery prospects, but nervousness over the latest US economic data saw Japan’s Nikkei pushed into reverse.

The Hang Seng hit a nine-month high on the first day of trading in the year of the rabbit, with local stocks catching up to gains in other markets as trade resumed after the three-day Lunar New Year holiday.

However, Japan’s Nikkei share average snapped a four-session winning streak, with shipping firms leading the retreat, as traders waited on fourth-quarter US GDP data that could sway the Federal Reserve’s rate-hike path.

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The Nikkei index closed 0.12% lower at 27,362.75, after rising as much as 0.4% earlier in the session. The broader Topix slipped 0.12% as well to 1,978.40.

The S&P 500 ended lower on Wednesday as a string of corporate earnings ran the gamut from downbeat to dismal, reviving worries over the economic impact of the Fed’s restrictive policy.

That downbeat mood fed into Tokyo’s main bourse and chip-related Tokyo Electron and Advantest lost 1.81% and 2.24%, respectively, dragging the Nikkei down.

Hong Kong stocks, though, saw a jump as traders returned after their New Year break and the Hang Seng Index gained 2.37%, or 522.13 points, to 22,566.78, while the Chinese H-shares Hang Seng China Enterprises Index rose 2.2% to 7,651.12, its highest since July 5.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.85%. Mainland China markets are due to resume on Monday.

US Fourth-Quarter GDP

Globally, the dollar wobbled near an eight-month low against its peers as a gloomy fourth-quarter earnings season continued ahead of US Federal Reserve, European Central Bank and Bank of England meetings next week, with all three expected to continue hiking interest rates.

Ahead of that, the Commerce Department is due to release advance estimates of US fourth-quarter gross domestic product later on Thursday, with expectations that strong growth continued in the final months of 2022.

The MSCI all-country stock index was up 0.2% at 644.68 points, just short of Monday’s high for the year, with the benchmark now 6% up for 2023.

In Europe, the STOXX index of 600 leading companies was up 0.5%, leaving it up about 6% for the year, erasing about half of last year’s losses.

“What the market is really looking for is what the Fed will say next week in terms of how many hikes they have in mind,” Laureline Renaud-Chatelain, fixed income strategist at Pictet Wealth Management, who expects a 25-basis point hike at next week’s Fed meeting.

“The US GDP release will be of key interest to gauge whether the market expectations shifting in favour of a soft landing rather than a recession can continue to hold,” Saxo strategists said in a note to clients.

Yen Strengthens Against Dollar

In the currency market, the dollar index, which measures the US currency against six major rivals, was at 101.70, not far off the eight-month low of 101.51 it touched last week.

The Japanese yen strengthened 0.15% to 129.76 per dollar, while sterling was last trading at $1.2393, down 0.06% on the day.

The yield on 10-year Treasury notes eased to 3.454%, while the yield on the 30-year Treasury bond was lower at 3.6092%.

Oil prices were steady after US crude stocks rose less than expected. US West Texas Intermediate crude was slightly firmer at $80.2 per barrel, while Brent was at $86.05, down 0.08% on the day.

Gold prices touched a nine-month high, with spot gold at $1,941 per ounce, after hitting $1,949.09 earlier in the day.

Key figures

Tokyo – Nikkei 225 < DOWN 0.12% at 27,362.75 (close)

Hong Kong – Hang Seng Index > UP 2.37% at 22,566.78 (close)

Shanghai – Composite <> CLOSED

London – FTSE 100 > UP 0.22% at 7,761.87 (0935 GMT)

New York – Dow > UP 0.03% at 33,743.84 (Wednesday close)

Reuters with additional editing by Sean O’Meara

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.