Hang Seng and ASX 200 Fall on US Tariffs and Inflation; Nikkei 225 Rises

US Markets Mixed on Tariff Concerns and Inflation

It was a mixed session for US equity markets on Wednesday, March 13. Hopes for an end to the Ukraine war and softer headline and core US inflation numbers countered ongoing tariff jitters.

The Nasdaq Composite Index and the S&P 500 posted gains of 1.22% and 0.49%, respectively, while the Dow dropped 0.20%.

On March 13, President Trump rolled out sweeping 25% tariffs on steel and aluminum, fueling fears of a global trade war.

US Inflation Cools Pre-Tariffs

On March 12, US inflation figures drew investor interest amid expectations that tariffs could drive prices higher.

The US annual inflation rate eased to 2.8% in February, down from 3% in January. Core inflation fell from 3.3% to 3.1%. The February numbers preceded Trump’s latest roll out of tariffs, including Wednesday’s levies on steel and aluminum.

However, February’s inflation figures failed to boost Fed rate cut bets. Markets expect tariffs to raise US import prices, fueling inflationary pressures. According to the CME Fed WatchTool, the chances of a June Fed rate cut fell from 84.2% on March 11 to 79.8% on March 12.

Economists attributed softer inflation to falling airfares and car insurance costs, though these will have limited influence on the Fed’s preferred Core PCE Price Index.

Nick Timiraos, Wall Street Journal Chief Economics Correspondent, remarked:

“February’s CPI was lower than expected but a couple components that were cool don’t feed into the Fed’s preferred gauge. The upshot is that forecasters expect a firmer Feb PCE inflation reading, though this could change Thurs after the PPI.”

Asian Market Implications: Trump’s latest tariffs and fears of an escalation in the US-China trade war set the tone for Asian markets on Thursday, March 13.

Hang Seng Index Dips on US-China Trade War Jitters

In Asia, the Hang Seng Index fell 0.74% on Thursday morning as renewed fears of a U.S.-China trade war dampened risk appetite. China’s Foreign Ministry warned of retaliatory measures, further impacting investor sentiment.

• The Hang Seng Technology Index slid by 2.17%, with the Hang Seng Mainland Properties Index down 1.71%.
• Alibaba (09988.HK) dropped 2.89%, with Tencent (80700.HK) falling 1.63%.
• EV stocks also struggled, with Li Auto (2015) and NIO Inc. (09866.HK) falling 0.89% and 2.24%.

Mainland China’s equity markets also struggled as market focus returned to tariffs. The CSI 300 and Shanghai Composite Index fell 0.21% and 0.44%, respectively.

Nikkei Index Advances on Softer Yen and Tech Sector Strength

The Nikkei Index rose 0.55% on Thursday morning. Investors reacted to the US inflation data, influencing the USD/JPY pair. Overnight Japanese Yen weakness contributed to the morning gains, rising 0.31% to close the Wednesday session at 148.233. A weaker Yen could boost corporate earnings.

Tech stocks contributed to the morning gains, with Softbank Group (9984) and Tokyo Electron (8035) rising 0.69% and 0.77%, respectively.

ASX 200 Extends Losses on Tariff Woes

Australia’s ASX 200 tracked the Dow Jones’ overnight losses, falling 0.35% on Thursday morning. Banking and mining stocks contributed to the losses, reflecting market angst over US tariffs and China’s latest response. Wednesday’s news of the US rejecting tariff exemptions for Aussie aluminum and steel exporters added to the negative mood.

• Iron ore spot prices fell 1.24% overnight on March 12 in response to the latest US tariffs, weighing on Aussie miners. BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) fell 1.49% and 1.13%, respectively.
• Aussie Banks extended their losses from Wednesday amid concerns about the economic outlook. Westpac Banking Corp. (WBC) led the losses, falling 1.40%.

Outlook: Key Risks and Opportunities

Global markets remain sensitive to a combination of economic risks and policy shifts:

• US-China Trade Tensions: A key driver of sentiment in Asian markets.
• US Economic Data: Crucial for influencing Fed rate expectations.
• China’s Stimulus Measures: Potentially mitigating global economic uncertainty.
• Central bank guidance: Investors will closely watch monetary policy updates.

Despite near-term risks, China’s economic stimulus efforts could provide support, helping to stabilize global financial markets.

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