Hang Seng Index Rises; Nikkei and ASX 200 Struggle Amid US Tariff Fears

US Markets: Wall Street Extends Gains from Friday

On Monday, November 25, US equity markets added to their gains from Friday. The Nasdaq Composite Index gained 0.27%, the S&P 500 added 0.30%, and the Dow jumped 0.99%.

Despite these gains, Nvidia (NVDA) slid by 4.18%, capping the Nasdaq’s gains. However, news of a ceasefire between Israel and Hezbollah bolstered risk sentiment.

US Economic Indicators Test Fed Rate Cut Bets

On Monday, weaker-than-expected US economic indicators supported buyer appetite for US-listed stocks. The Dallas Fed Manufacturing Index increased from -3 in October to -2.7 in November, while the Chicago Fed National Activity Index unexpectedly declined in October.

The Dallas Fed Manufacturing Index had a greater influence on market risk sentiment, pushing the major indexes higher.

Trump Spooks Markets with Fresh Tariff Threat

On Monday, President-elect Donald Trump announced plans to impose tariffs on his first day in the White House, affecting the markets. CN Wire shared the news, stating,

“Trump says he will sign documents to charge Mexico and Canada a 25% tariff, and China a 10% additional tariff on all products as one of his first executive orders on his first day in the White House.”

Significantly, Trump’s comments raised concerns about Mexico becoming an option for China to circumvent US tariffs.

The news drove US dollar demand amid concerns over the potential impact of US tariffs on global trade. Trump’s pledge on tariffs set a cautious tone for Tuesday’s Asian trading session.

Market Reaction to Trump’s Tariff Warning

Early in Tuesday’s Asian session, Bloomberg TV Asia Pacific Chief Markets Editor David Ingles remarked on Trump’s tariff threat, saying,

“President-elect Trump rattles global markets with new tariff threat. Risk assets selling off early Tuesday – Yuan, Mexican Peso, Aussie, S&P futures all down.”

Hang Seng Index and Mainland China Markets Advance

In Asian markets, the Hang Seng Index gained 0.52% on Tuesday morning as investors brushed aside Trump’s tariff threats. Tech stocks contributed to the morning gains, with the Hang Seng Tech Index advancing by 0.19%. Notably, Baidu (9888) surged by 3.73%, with Alibaba (9988) gaining 1.10%.

Mainland China’s equity markets recovered from early losses, with the CSI 300 and the Shanghai Composite up 0.12% and 0.21%, respectively. Expectations of fresh stimulus and potential trade adjustments bolstered sentiment.

Despite the morning gains, Trump’s tariff threats remain headwinds for Hong Kong and Mainland China-listed stocks.

Nikkei Index Under Pressure

Japan’s Nikkei Index slid by 1.41% amid uncertainty about the Bank of Japan’s December interest rate decision. Speculation about a December rate hike bolstered Japanese Yen demand, potentially weighing on corporate earnings. The USD/JPY pair dropped by 0.03% to 154.130 this morning.

Tech stocks Softbank Group Corp. (9984) and Tokyo Electron (8035) declined by 1.30% and 2.96%, respectively. Meanwhile, Nissan Motor Corp. (7201) tumbled by 4.25%. Trump’s tariff threats likely contributed to the pullback.

Later in the Tuesday session, the Bank of Japan’s core inflation data could influence December rate hike bets. Economists expect the core inflation rate to rise from 1.7% in September to 1.8% in October.

ASX 200 Retreats Amid Tariff Jitters

Turning to the Australian market, the ASX 200 Index declined by 0.38% on Tuesday morning. Investors reacted to Trump’s threat of broader tariffs, potentially impacting Aussie trade terms. Banking, gold, and oil stocks dragged the Index lower.

Commonwealth Bank of Australia slid by 2.96%, reflecting fears over potential trade disruptions.

Meanwhile, Woodside Energy Group Ltd. (WDS) dropped by 2.56% after oil prices tumbled overnight on the reports of a ceasefire between Israel and Hezbollah. Furthermore, Northern Star Resources Ltd. (NST) declined by 1.53% as easing geopolitical tensions dampened demand for gold as a safe-haven asset. Gold prices fell 3.33% to $2,625 on Monday.

Outlook

Investors should track inflation figures from Japan, stimulus chatter from China, and central bank commentary. Fresh stimulus from Beijing, targeting domestic consumption, could drive demand for riskier assets. However, a more hawkish BoJ could drive demand for the Japanese Yen, weighing on Nikkei Index-listed stocks. Stay tuned for our latest updates to manage risks effectively.