Hang Seng Index: China PMI Data Cushions Drop as Tariff Angst Sinks Risk Appetite

Will Tariffs and Inflation Trigger a Global Equity Retreat?

On Friday, March 28, US equity markets tumbled as investors reacted to stronger-than-expected US inflation data. The Nasdaq Composite Index slid 2.7% on March 28, while the Dow and the S&P 500 declined by 1.69% and 1.97%, respectively.

Investor concerns deepened on fears of escalating trade tensions, with markets expecting President Trump to follow his 25% tariff on all car imports with further reciprocal measures. Tariff uncertainties intensified concerns about the global economic outlook.

Flight to safety trades left 10-year US Treasury yields down 11 basis points, while gold soared to a record high of $3,084.

US Data Fuels Stagflation Concerns

On March 28, the US Personal Income and Outlays Report impacted market sentiment. The Core PCE Price Index rose 2.8% year-on-year in February, up from 2.7% in January, which supported a more hawkish Fed stance. However, a softer-than-expected rebound in personal spending and a jump in personal income raised stagflation fears and boosted demand for safe-haven assets.

Consumer sentiment and inflation expectations underscored the market concerns about tariffs and the economic outlook. The Michigan Inflation Expectations Index surged from 4.3% in February to 5.0% in March, while the Consumer Sentiment Index fell from 64.7 to 57.0.

Asian Market Implications: Asian markets opened the week under pressure, tracking Friday’s US losses. During Monday’s session on March 31, tariff concerns and signs of weakening US consumer sentiment weighed on risk sentiment.

China PMI Hints at Modest Stimulus Traction

On March 31, China’s private sector PMI data signaled a pickup in private sector activity, indicating that Beijing’s stimulus efforts were taking effect.

According to the National Bureau of Statistics:

• The NBS Manufacturing PMI rose from 50.2 in February to 50.5 in March.
• The NBS Non-Manufacturing PMI increased from 50.4 to 50.8 in March.

According to data from CN Wire:

• The new order index rose 0.7 percentage points to 51.8.
• In contrast, the net export order index contracted for the eleventh consecutive month despite rising from 48.6 in February to 49.0 in March.

Brian Tycangco, editor/analyst at Stansberry Research, commented:

“China’s official manufacturing PMI improves in March to match an expected 50.5 reading. Non-mfg (services) PMI also improved to 50.8. The economy is expanding at a moderate pace. Expect stimulus to continue as Beijing keeps up efforts to offset global economic uncertainty and weak export growth.”

Hang Seng Index Dips Amid Tariff Uncertainty

In Asia, the Hang Seng Index dipped 0.36% on Monday morning. US inflation and tariff concerns weighed on risk sentiment. However, the pullback was modest, with China’s upbeat PMI numbers helping cushion the downside. Automobile, real estate, and technology sectors led the declines. Key market movers included:

• The Hang Seng Mainland Properties Index dropped 1.04%, while the Hang Seng Technology Index slid 1.14%.
• Alibaba (09988.HK) and Baidu (09888.HK) posted morning losses of 2.37% and 3.54%, respectively.
• Auto stocks extended Friday’s losses, with BYD Company Ltd. (01211.HK) and Li Auto Inc. (02015.HK) down 1.57% and 1.41%, respectively.

Mainland China’s equities posted modest losses, supported by upbeat PMI data. The CSI 300 and Shanghai Composite Index declined by 0.02% and 0.17%, respectively.

Nikkei Suffers Steep Losses

The Nikkei Index plunged 3.69% on Monday morning as Trump’s trade policies exposed Japanese exporters to declining US demand risks amid tariff threats.

Japanese automakers faced another day of heavy selling. Nissan Motor Corp. (7201) dropped 3.12%, while Honda Motor Co. (7267) fell 2.71%. Japan is the second largest exporter of cars to the US, leaving major exporters to the US vulnerable to tariff risks.

The Nasdaq’s losses weighed on tech stocks, with Softbank Group (9984) and Tokyo Electron (8035) tumbling 5.10% and 5.81%, respectively.

ASX 200 Declines as Recession Fears Rise

Australia’s ASX 200 also faced heavy selling pressure, sliding 1.68% on Monday morning. Banking, mining, and tech stocks led the losses.

• Banking stocks: ANZ (ANZ) fell 2.40%, while Westpac Banking Corp. (WBC) declined by 1.94%.
• Mining Stocks: BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) dropped 2.95% and 3.03%, respectively. Iron ore spot prices fell 0.51%, extending losses from Friday.
• The S&P/ASX All Technology Index slid by 2.20%, tracking US tech stocks lower.

Outlook: Tariff Risks and Central Bank Signals in Focus

Markets remain highly sensitive to tariff developments and central bank guidance. Further trade escalation could weigh on sentiment, though Beijing may counter with additional stimulus to stabilize equity markets in China and Hong Kong.

Investors should also continue watching central bank commentary closely as inflation rises in the US.

How can investors navigate the tariff-driven market volatility? Explore our full analysis here for trading strategies in today’s volatile landscape.