Hang Seng Index and Nikkei 225: Tariff Tensions and BoJ Bets Roil Sentiment

Tariff Fears Deepen Market Slide as Global Stocks React

US equity markets extended losses on Thursday, March 27, as President Trump’s tariff policies deepened economic uncertainty. The Nasdaq Composite Index fell 0.53%, while the Dow and the S&P 500 declined 0.37% and 0.33%, respectively.

Trump’s 25% tariff on imported cars takes effect on April 3, followed by levies on auto parts on May 3. Markets are also bracing for tariffs targeting the pharmaceutical and tech sectors, potentially as early as next week. President Trump’s flip-flopping on tariff policies has heightened market uncertainty, weighing on risk assets.

US Labor Market and GDP Numbers Reflect Economic Resilience

On March 27, US jobless claims and finalized Q4 GDP data provided early support. Initial jobless claims dropped from 225k (week ending March 15) to 224k (week ending March 22).

Parker Ross, Chief Global Economist at Arch Capital, commented:

“Headline initial (224k) and continuing claims (1,856k) were roughly in-line and below expectations (225k & 1,886k, respectively), but Federal continuing claims– which aren’t counted in the headline figures–are still marching higher.”

Meanwhile, the US economy expanded by 2.4% quarter-on-quarter in Q4 2024, up from a preliminary 2.3%. While growth slowed from 3.1% in Q3 2024, the upward revision reinforced confidence in the economy’s resilience.

Asian Market Implications: Asian markets showed a mixed response on Friday, March 28, as tariff concerns dampened risk appetite.

Tokyo Inflation Strengthens BoJ Rate Hike Expectations

On March 28, Tokyo’s inflation figures supported bets on a July Bank of Japan rate hike. Core inflation accelerated from 2.2% in February to 2.4% in March, surpassing the BoJ’s 2% target. A more hawkish BoJ stance could strengthen the Japanese Yen, reducing demand for Japanese goods, which could impact earnings. The USD/JPY was down 0.14% to 150.816 in morning trade.

Hang Seng Index Falls on Tariff Jitters

In Asia, the Hang Seng Index fell 0.53% on Friday morning. Uncertainty about Trump’s tariff plans for China left investors cautious, fueling demand for safe haven assets, including gold.

David Ingles, Asia Pacific Chief Markets Editor at Bloomberg, commented:

“Global markets in 2025: there’s gold and there’s everything else. Gold up virtually every week. On price, gold +16% vs bonds (+2%), stocks (flat), crypto (-7%). On momentum, it’s not even close”

Despite Friday’s pullback, the Hang Seng Index remains up 16.44% year-to-date. China’s AI advancements and stimulus efforts have fueled investor demand. Optimism that Trump may reduce tariffs to pressure ByteDance into selling TikTok also offered support.

Key market movers included:

• The Hang Seng Mainland Properties Index fell 0.94%, while the Hang Seng Technology Index dropped 1.13%.
• Alibaba (09988.HK) rose 0.61%, while Baidu (09888.HK) dipped 0.68%.
• Meanwhile, auto stocks gave up some of Thursday’s gains. BYD Company Ltd. (01211.HK) and Li Auto Inc. (02015.HK) were down 0.39% and 2.52%, respectively.

Mainland China’s equities also posted morning losses, with the CSI 300 and Shanghai Composite Index falling 0.27% and 0.49%, respectively.

Nikkei Slumps on Stronger Yen and Trade Concerns

Japan’s Nikkei Index tumbled 2.09% on Friday morning as inflation numbers from Tokyo and tariff uncertainties weighed on sentiment.

Japanese automakers faced another day of heavy selling. Nissan Motor Corp. (7201) slid 3.19%, while Honda Motor Co. (7267) plunged 4.64%. Japan ranks second behind Mexico as the second largest car exporter to the US.

The tech sector also struggled as more tariffs loomed. Softbank Group (9984) and Tokyo Electron (8035) dropped 1.86% and 1.54%, respectively.

ASX 200 Edges Higher on Commodity Strength

Meanwhile, Australia’s ASX 200 gained 0.22%, bucking the broader market trend. Gains in commodity-linked stocks underpinned the index.

• Gold Stocks: Northern Star Resources (NST) soared 4.82% as gold rallied to a Friday morning record high of $3,078.
• Mining Stocks: BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) rose 0.77% and 1.07%, respectively. Iron ore futures climbed 0.44%, extending gains from Thursday, driving demand for mining stocks.

Risk aversion fueled the demand for gold. However, China’s stimulus goals could cushion Trump’s tariff drag by boosting domestic consumption, supporting Aussie exports.

Outlook: Markets Monitor Tariffs and Central Bank Cues

Markets remain sensitive to developments in tariff policy, potential retaliations, and central bank communication. Renewed US-China tensions could affect the global economy and dampen risk sentiment. However, Beijing may respond with fresh stimulus to cushion growth, supporting equity markets in Hong Kong and Mainland China.

At the same time, forward guidance from major central banks remains crucial amid lingering inflation risks and geopolitical headwinds.

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