Hang Seng Index and Nikkei 225 Fall Amid Nvidia Supply Concerns and Fed Rate Shifts

US Markets: Nvidia Signals Length Supply Constraints

On Wednesday, November 20, US equity markets delivered a mixed performance. The Nasdaq Composite Index slipped by 0.11%, while the Dow advanced by 0.32%. The S&P 500 ended the session flat.

Nvidia (NVDA) ended the session down 0.76% as investors awaited the company’s after-hours earnings release. Market caution left tech stocks under pressure, with Tesla (TSLA) declining by 1.15%.

In after-hours trading, Nvidia declined by 2.53% after the firm signaled potential supply constraints that could last until 2026. While Q3 revenue was impressive, the company’s outlook disappointed markets, setting the tone for Thursday’s Asian session.

Geopolitical Risk: Tensions Intensify

Geopolitical tensions added to the market uncertainty. Earlier this week, Russia warned that Ukraine’s latest missile attack increased the chance of a nuclear response. While Russian foreign minister Sergei Lavrov downplayed the threat, further attacks on Russia could increase market volatility.

Fed Rate Outlook Shifts

The chances of a December Fed rate cut dropped from 58.9% on November 19 to 52.3% on November 20, according to the CME FedWatch Tool. Markets expect Trump policies to drive inflation, reducing the number of Fed rate cuts in 2025.

According to a Reuters Poll, analysts expect the Fed to cut rates by around 75 basis points by the end of 2025.

Notably, 82% of pollsters believed the incoming Trump administration would implement proposed import tariffs in 2025.

Anticipation of US tariffs on China remains a headwind for Hong Kong and Mainland China-listed stocks despite Beijing’s stimulus efforts. Markets await stimulus targeting domestic consumption to bolster the economy.

US Tariffs and Supply Chain Risks

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented about potential US tariffs on China, stating,

“One of Trump’s most scary words for countries trading with #China will be the Reciprocal Trade Act. It will start showing that supply chain reshuffling is not enough to avoid US import tariffs. Chinese companies having invested heavily in Vietnam and Mexico but also American companies having moved from China to India, Vietnam, etc, will no longer manage to bypass the tariffs.”

The US Reciprocal Trade Act could pose new challenges for Chinese companies looking to circumvent tariffs by moving production overseas.

Hang Seng Index and Mainland China Equity Markets Drift Lower

In Asian markets, the Hang Seng Index was down 0.20% on Thursday morning. Expectations of fewer Fed rate cuts impacted the real estate sector, while Nvidia’s outlook tested demand for tech stocks.

The Hang Seng Mainland Property Index (HSMPI) and the Hang Seng Tech Index saw declines of 1.03% and 0.52%, respectively. Tech giant Tencent (0700) dropped by 0.73%.

Mainland China’s equity markets also entered negative territory as looming US tariffs remained a headwind. The CSI 300 and the Shanghai Composite declined by 0.25% and 0.21%, respectively.

Nikkei Index Weighed by Tech Stocks and a Stronger Yen

Japan’s Nikkei Index declined 0.76% on Thursday morning, pressured by tech stocks and a stronger Japanese Yen. The USD/JPY was down 0.26% to 154.982.

Softbank Group Corp. (9984 and Tokyo Electron (8035) declined by 1.84% and 0.05%, respectively, while Nissan Motor Corp. (7201) slid by 2.12%.

ASX 200 Edges Lower as Tech and Commercial Bank of Australia Weigh

In Australia, the ASX 200 Index slipped by 0.02% on Thursday morning, erasing early gains. Aussie banking giant Commonwealth Bank of Australia and tech stocks declined, offsetting gains in mining, gold, and oil stocks.

Commonwealth Bank of Australia (CBA) was down 0.37%, while the S&P/ ASX All Technology Index declined by 0.07%.

However, Northern Star Resources Ltd. (NST) rallied 2.78% on rising gold prices, with Woodside Energy Group Ltd. (WDS) gaining 0.66%. Higher iron ore spot prices drove demand for mining stocks, with Rio Tinto Ltd. (RIO) advancing by 0.17%.

Outlook

Investors will closely monitor forward guidance from central banks, geopolitical tensions, and Beijing’s potential next steps on stimulus. Upcoming economic data, including Japan’s inflation data, could also be crucial for near-term market trends.