Hang Seng Index and Nikkei 225: Tariff Tensions Weigh While Yen Boosts Japan

Wall Street Rallies on Economic Rebound Signs; Tariff Signals Jolt Asian Markets

On Monday, March 24, US equity markets extended their gains from the previous session as investors responded to upbeat US data and President Trump’s tariff stance.

A pickup in service sector activity helped ease fears of a US recession, bolstering demand for risk assets. However, President Trump fueled a breakout after suggesting more targeted reciprocal tariffs from April 2, with potential tariff breaks for some countries.

The Nasdaq Composite Index surged 2.27%, while the Dow and the S&P 500 rose 1.42% and 1.76%, respectively. Hopes for less aggressive tariffs eased concerns about rising import costs, inflation pressures, and the Fed’s rate path. In the bond markets, 10-year US Treasury yields jumped to their highest level since February 25, reflecting improved market sentiment.

US Services PMI Signals Economic Resilience

The S&P Global Services PMI unexpectedly rose from 51.0 in February to 53.2 in March. Accounting for around 80% of US GDP, the upswing pointed to a resilient US economy, easing recession fears.

According to the March survey, input costs increased at the fastest pace for 18 months, pushing selling prices higher. Service providers also expanded hiring. Higher inflation and rising employment could temper multiple Fed rate cut bets. However, easing market concerns about the US economic outlook offset fears of fewer 2025 Fed rate cuts.

Chief Business Economist at S&P Global Market Intelligence commented:

“Thankfully, from the Federal Reserve’s perspective, services inflation remains relatively subdued, but this reflects the need to keep prices low amid weak demand, which will harm profits.”

Asian Market Implications: Asian markets opened mixed on Tuesday, March 25, as traders processed developments from the US.

Hang Seng Index and Mainland China Markets Fall on Looming Tariffs

In Asia, the Hang Seng Index slid by 2.17% on Tuesday morning, with Trump’s tariff plans weighing on investor sentiment. While investor jitters weighed on the real estate sector, the tech sector bore the brunt of Tuesday’s sell-off.

• The Hang Seng Technology Index tumbled by 3.53%, while the Hang Seng Mainland Properties Index dropped by 1.19%.
• Tech giants Alibaba (09988.HK) and Baidu (09888.HK) posted morning losses of 3.39% and 1.39%, respectively.
• Trump’s plans to impose tariffs on autos led BYD Company Ltd. (01211.HK) down 3.42%, with Li Auto Inc. (02015.HK) sliding 3.90%.

Mainland China’s losses were more subdued. The CSI 300 dipped by 0.19%, while the Shanghai Composite Index declined by 0.18%. Optimism toward China’s growth outlook helped limit downside pressure after Morgan Stanley raised its 2025 GDP growth forecast from 4.0% to 4.5%.

Nikkei Index Climbs on USD/JPY Return to 150

Meanwhile, the Nikkei Index rose 0.48% on Tuesday morning amid easing tariff concerns and a weaker Yen that supported export-linked stocks. The USD/JPY surged by 0.94%, ending the March 24 session at 150.694. A softer Japanese Yen improved the competitiveness of Japanese exports, improving the outlook for corporate earnings.

Notable gainers: Softbank Group Ltd. (9984) and Tokyo Electron (8035) gained 0.59% and 1.13%, respectively. Nissan Motor Corp. (7201) rose 0.63%.

ASX 200 Tracks Wall Street Higher

Australia’s ASX 200 rose 0.14%, supported by Wall Street’s overnight gains. Tech stocks sent the Index higher.

• The S&P/ASX All Technology Index rallied 1.14%.
• However, banking stocks capped the morning gains. ANZ (ANZ) slid 3.20%, with investors likely taking profits. Rising US Treasury yields may affect demand for high-yielding Aussie banks.

Outlook: Trade and Policy Remain in Focus

Markets remain highly sensitive to trade dynamics and central bank signals. Renewed US-China trade tensions could dampen sentiment but may also trigger additional stimulus from Beijing. Such measures would likely support Hong Kong and Mainland equities.

Meanwhile, forward guidance from central banks will be critical amid lingering inflationary pressures and geopolitical uncertainty.

While risks persist, China’s policy support and innovation push may continue to underpin regional equities. Further consumer-oriented stimulus could help shield the region from potential US economic headwinds.

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