Hang Seng Index Gains on China Stimulus Hopes, While Nikkei Slides on Tech Sell-Off
Tech Stock Rout Triggers Global Sell-Off: US and Asian Markets React
On Tuesday, October 15, US Equity Markets reversed their gains from Monday as investors faced a tech stock rout. ASML sparked a sell-off after disappointing earnings results and a weaker outlook for 2025.
The Nasdaq Composite Index slid by 1.01%, while the Dow and the S&P 500 saw losses of 0.75% and 0.76%, respectively.
Sticky US Inflation Spurs Fed Rate Cut Speculation
On Tuesday, Consumer Inflation Expectations unexpectedly remained at 3.0% in September, suggesting a sticky inflation outlook. Notably, the September numbers aligned with the US CPI Report, which showed core inflation rise from 3.2% in August to 3.3% in September.
Despite the inflation data, the CME FedWatch Tool indicated a rising chance of a 25-basis point rate cut in November. Fed concerns about the US labor market and recent US producer price figures likely influenced sentiment. The probability of a 25-basis point Fed rate cut increased from 83.6% to 95.5% between October 14 and October 15.
China-US Relations in the Spotlight
The overnight US equity market session will set the tone for the Wednesday Asian session. However, China remains in focus, with markets awaiting further fiscal stimulus measures. On Wednesday, October 16, CN Wire reported on China’s efforts to bolster relations with the US, stating,
“China’s President Xi: China willing to be a partner and friend with the US. The success of China and the US is a mutual opportunity. Both should boost, not obstruct, each other’s development.”
According to CN Wire, Xi Jinping wrote the comments in a congratulatory letter to the National Committee on US-China Relations.
Improved US-China relations could ease tariff concerns that may benefit the global economy.
Expert Views on China’s Stimulus Measures
While improving US-China relations is crucial, economists continued to comment on China’s need for more fiscal stimulus measures. Natixis Asia Economist Alicia Garcia Herrero remarked,
“I really think they need to get their act together and announce a stimulus ASAP.”
Hang Seng Index and Mainland China Equities Gain
Turning to the Asian equity markets, the Hang Seng Index gained 0.40% in the Wednesday morning session.
Expectations for further stimulus measures from Beijing benefited the real-estate sector, which countered losses from the tech sector. The Hang Seng Mainland Properties Index (HMPI) rallied 4.72%, with Shimao Group Holdings Ltd. (813) and Longfor Group Holdings Ltd. (960) surging by 7.48% and 6.86%, respectively.
Mainland China’s equity markets recovered from early losses on the news from China and stimulus hopes. The CSI 300 and Shanghai Composite saw gains of 0.51% and 1.02%, respectively.
Nikkei Slides in Tech Sector Rout
In contrast, the Nikkei Index slid by 2.05% on Wednesday morning. The US tech sector sell-off impacted demand for Nikkei Index-listed tech stocks. Additionally, a weaker USD/JPY pair contributed to the losses.
Tokyo Electron (8035) and Softbank Group Corp. (9984) tumbled by 9.88% and 4.61%, respectively, while Nissan Motor Corp. (7201) declined by 1.31%.
ASX 200 Succumbs to US Tech Losses
On Wednesday, the ASX 200 Index fell 0.12%, due to the ripple effect from US tech losses. Mining and tech sector stocks dragged the Index lower, offsetting gains in banking, gold, and oil stocks.
Mining giants BHP Ltd. (BHP) and Rio Tinto Ltd. (RIO) saw losses of 1.18% and 0.92%, respectively. Rio Tino’s third quarter production update disappointed investors. The S&P/ASX All Technology Index tracked the Nasdaq Composite, falling 0.70%.
Looking Ahead
Investors should remain alert, with stimulus news from Beijing and central bank commentary requiring consideration. USD/JPY trends will continue to influence the Nikkei Index. The US futures may impact broader market sentiment.