Hang Seng Index May Fall After US CPI Beat Raised Odds of a More Aggressive Fed

Hang Seng Index, Hong Kong equities, US CPI, Fed, Technical Analysis – Market Alert

• Hang Seng Index futures slump after US CPI data unexpectedly beat estimates
• This raised bets of a more aggressive Federal Reserve at September’s meeting
• Ahead, Hong Kong equities may be at risk for the Wednesday trading session

Hang Seng Index futures fall after Unexpectedly strong US inflation data

Hang Seng Index futures slipped after stronger-than-expected US inflation data crossed the wires. The headline US Consumer Price Index (CPI) rose 8.3% y/y in August versus 8.1% expected, but down from 8.6% in July. Meanwhile, core CPI, which excludes food and energy prices, rose 6.3% y/y versus 6.1% expected, also rising from 5.9% in July.

The latter meant that the index remained around 40-year highs, suggesting underlying price pressures persisted even though gasoline prices have fallen sharply. The inflation data solidified bets that the Federal Reserve will continue to tighten monetary policy aggressively. Markets are now pricing in about a 66% chance of a 0.75 percentage point increase at its meeting next week with a 33% chance of a full percentage point hike.

Wednesday’s Asia Pacific Trading Session

The slide in US equities could weigh on Hong Kong equities, which have been grappling with Chinese ADR delisting woes and extended Covid-induced lockdowns in China. While Chinese authorities have signaled a renewed sense of urgency to shore up the ailing economy, the regional benchmarks have yet to see a meaningful rebound.

Beijing’s recent announcement of a slew of measures to boost investment, consumption and employment has yet to reverse the underperformance of Chinese and Hong Kong stock markets. Meanwhile, downward revisions to Chinese growth estimates continue amid sluggish domestic demand and record-high youth unemployment. In this regard, the key focus now is on a slew of Chinese data due on September 16th – house prices, retail sales, industrial production, fixed asset investment and unemployment.

Hang Seng Futures Index Technical Analysis

The failure in June to break above crucial resistance at the April high of 22535 and the subsequent sequence of lower lows and lower highs confirms that the broader trend remains downward titled. There might be a growing chance of a retest of the May low of 24,685 in the coming days. A break below 24,685 could expose downside risks toward the March low of 23,425.

Hang Seng Futures Index Daily Chart

Chart Created in TradingView

— Written by Manish Jaradi, Strategist for DailyFX.com

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