Hang Seng Index Hits Six-Week Streak on Earnings and Stimulus Hopes – Weekly Recap

US Markets Tumble Amid Recession Fears and Tariff Jitters

It was an eventful week ending February 21 for US markets. Investors grappled with corporate earnings, tariff developments, US data, and the Fed.

The Nasdaq Composite Index ended the week down 2.51%, while the Dow and the S&P 500 fell 2.51% and 1.66% for the week.

Notable movers included Walmart (WMT), which slid by 8.90% in the week after releasing weaker-than-expected revenue. The pullback impacted retail-linked stocks, with Amazon.com (AMZN) sliding by 5.29%.

US Tariff Delays Give Way to Sweeping Trade Barriers

Earlier this month, President Trump delayed reciprocal tariffs on nations imposing duties on US goods, temporarily boosting investor sentiment. However, the relief was short-lived. Trump announced sweeping tariffs targeting the auto, semiconductor chip, and pharmaceutical sectors. The rising threat of a global trade war weighed on market sentiment.

US tariffs could raise import prices and inflation, limiting the Fed’s ability to cut rates. Higher borrowing costs may affect company earnings.

US Economic Data Signals Recession Risks

Key US economic indicators fueled speculation about an H1 2025 Fed rate cut.

• US labor market softens: Initial jobless claims rose from 214k to 219k in the week ending February 15.
• Services PMI slides: The S&P Global Services PMI fell from 52.9 in January to 49.7 in February, dipping below the critical 50 threshold and sparking recession fears.
• Consumer Sentiment Wanes: The Michigan Consumer Sentiment dropped to 64.7 in February, down from 71.1 in January, while inflation expectations soared from 3.3% to 4.3%.

The Services sector contraction was particularly concerning. Accounting for around 80% of US GDP, the sector contraction could signal a US recession. Chief Business Economist at S&P Global Market Intelligence, Chris Williamson, commented:

“Whereas the survey was indicating robust economic growth in excess of 2% late last year, the February survey signals a faltering of annualised GDP growth to just 0.6%.”

China Counters US Tariff Threats with Stimulus Pledges

There was plenty of activity in Beijing amid rising threats of a full-blown US-China trade war.

On February 17, the Chinese government hosted a symposium for private enterprises. China’s President Xi Jinping reaffirmed his support for private enterprises, urging businesses to play a central role in economic growth.

On February 19, Beijing announced plans to boost domestic demand for autos, electronics, and home products, reinforcing its transition toward a consumption-driven economy.

Economists see this transition as crucial to China’s economic growth prospects. Natixis Asia Pacific Chief Economist Alicia Garcia Herrero highlighted the pressing need for a transition, saying:

“The only way out for China is to produce less. It will be very painful. Nobody is going to take your products forever. So it’s just a choice: if you want to create more welfare, more growth, then you need to consume more.”

China’s pledge to target domestic consumption contributed to the weekly gains in Hong Kong and Mainland China markets.

Hong Kong and Mainland China Markets Advance on Stimulus Pledges and Earnings

The Hang Seng Index rallied 3.79%, extending its winning streak to an impressive six weeks, the longest since 2019. Investors shrugged off trade war jitters, focusing on Beijing’s stimulus pledges and corporate earnings.

Tech stocks led the gains:

• The Hang Seng Tech Index surged 6.03% in the week, also extending its winning streak to six weeks.
• Alibaba (9988) soared 11.60% after beating revenue forecasts.
• Tencent (0700) gained 9.12% for the week.

However, Baidu (9888) slid by 7.30% in the week. Investors reacted to Baidu’s absence from Beijing’s Symposium and a decline in quarterly revenue.

Mainland China’s equity markets advanced despite ongoing US tariff threats. Hopes of fresh stimulus measures to boost domestic consumption mitigated trade war risks. The CSI 300 and Shanghai Composite Index rose 1% and 0.97% for the week ending February 21.

For more analysis on the Hang Seng Index and global market trends, click here.

Commodities: Gold Hovers Below $3,000; Iron Ore Rebounds

Commodities saw mixed performance during the week ending February 21:

• Gold extended its winning streak to eight weeks, gaining 1.85% to close at $2,936. Significantly, gold struck a new record high of $2,955 before easing back.
• Iron ore spot recovered losses from the previous week, rising 4.25% to $821.64.
• Crude oil ended the week down at $70.557 after sliding 3.39% on February 21 as investors fretted about a potential US economic slowdown.

ASX 200 Slides Amid Weak Bank Earnings and RBA Caution

The ASX 200 slid by 3.03% in the week. A less dovish-than-expected RBA outlook pressured Aussie stocks. Banking stocks were hit hard after disappointing earnings from major lenders.

• The Commonwealth Bank of Australia (CBA) slid by 8.29%.
• National Australia Bank (NAB) plunged 14.42%.
• Westpac Banking Corp. (WBC) tumbled 10.60%.

However, rising iron ore prices provided relief to mining stocks. BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) gained 0.83% and 1.91%, respectively.

Nikkei Index Slips on BoJ Rate Hike Bets and Yen Strength

The Nikkei Index ended the week down 0.81%, pressured by the USD/JPY pair falling 2.01% to 140.226. A stronger Japanese Yen could negatively affect overseas earnings and corporate valuations, especially for exporters.

The Yen strengthened amid rising expectations of a Bank of Japan rate hike. Upbeat Q4 GDP data, a pickup in inflationary pressures, and services sector activity fueled speculation about a more hawkish BoJ rate path.

Softbank Group Ltd. (9984) dropped by 2.56%, while Sony Corp. (6758) and Nissan Motor Corp. (7201) ended the week up 2.91% and 7.78%, respectively. Reports suggested that Nissan is considering attracting Tesla (TSLA) as an investor.

Market Outlook: Key Events to Watch

The upcoming week could be crucial for Asian markets. Economic data, geopolitics, and US tariff developments will be focal points. Key themes to watch include:

• US tariff policy: Progress toward sweeping US tariffs would impact risk sentiment, while de-escalation may trigger market relief.
• China stimulus-related news: Stimulus measures targeting consumption could boost demand for Hong Kong and Mainland China-listed stocks. A lack of stimulus may test buyer appetite.
• Central Bank forward guidance: Hawkish commentary may pressure Asian markets, with the BoJ in focus.
• USD/JPY trends: A sharp drop in the USD/JPY could trigger a Yen carry trade unwind, affecting broader market risk appetite.

Traders should stay attuned to evolving macroeconomic dynamics to navigate shifting market conditions.