Hang Seng Index: Tech Stocks Soar on Fed Bets and China Data – Weekly Recap

US Markets Rally Amid Rising Fed Rate Cut Bets

It was an action-packed week in the global markets as Trump’s inauguration loomed. While global markets considered looming US tariffs and diverging central bank policies, crucial shifts are impacting trading landscapes.

US equity markets broke a two-week losing streak in the week ending January 17. The Dow surged 3.69%, while the Nasdaq Composite Index and the S&P 500 gained 2.45% and 2.91%, respectively.

US economic indicators supported a less hawkish Fed rate path, sending 10-year US Treasury yields briefly below 4.6%. The pullback in yields fueled risk appetite.

US CPI Report Delivers Fed Relief

Key US economic indicators signaled a softer inflation environment but a resilient US economy.

• Producer prices (excluding Food, Energy, and Trade) increased by 3.3% year-on-year in December, down from 3.5% in November.
• Core inflation rate rose 3.2% in December, easing from 3.3% in November.
• Initial jobless claims increased from 203k (week ending January 4) to 217k (week ending January 11), but the 4-week average declined, signaling a tight labor market.
• Retail sales rose 0.4% in December after a 0.8% increase in November. The continued uptrend in consumer spending could bolster the US economy as it accounts for over 60% of GDP.

The softer inflation trend was crucial in dictating market sentiment. According to the CME FedWatch Tool, the chances of a 25-basis point May Fed rate cut increased from 36.6% on January 10 to 43.8% on January 17.

China Economy Sees Sharp Q4 Rebound

The week kicked off with trade figures. China’s US dollar trade surplus soared to $104.84 billion in December, widening from $97.44 billion in November. Significantly, exports rose 10.7% year-on-year in December, up from 6.7% in November, while imports rebounded.

It was a record month, with the combined value of imports and exports exceeding CNY 4 trillion for the first time.

December’s trade data contributed to an impressive economic rebound in Q4 2024. China’s economy expanded by 5.4% year-on-year in Q4 2024 compared to 4.6% growth in Q3 2024.

The Q4 figures reflected the effectiveness of Beijing’s stimulus measures. Despite the economic recovery, challenges remain. Rising unemployment (5.1% in December) and below-trend retail sales (3.7% year-on-year) indicated the need for stimulus targeting unemployment, household incomes, and broader demand.

A US-China trade war and rising global protectionism would increase pressure on Beijing to expedite its transition to a consumption-driven economy.

Brian Tycangco, editor and analyst at Stansberry Research commented on China’s economic data and outlook, stating,

“China’s GDP, retail sales, & industrial growth exceed estimates for full year 2024! This year will be a turning point of potentially epic proportions if Beijing is able to properly time fiscal and consumption-led stimulus. The property market continues to improve. And when Chinese consumers’ confidence returns in the property market, things are going to get pretty crazy in the domestic market.”

Hang Seng Index Rallies on Fed Bets, China Optimism

The Hang Seng Index ended a two-week losing streak with a 2.73% weekly gain. Hopes for a less hawkish Fed rate path and China’s economic resurgence boosted demand for Hong Kong-listed and Mainland China stocks.

The rate-sensitive tech sector led the gains, with the Hang Seng Tech Index rallying 5.13%. Tech giant Tencent (0700) gained 2.30%, while Baidu (9888) and Alibaba (9988) also posted gains.

Improving housing sector data also boosted real estate stocks. China’s House Price Index declined by 5.3% year-on-year in December, showing a smaller decline than November’s 5.7% drop. The Hang Seng Mainland Properties Index gained 3.73%.

China’s Mainland equity markets also ended the week in positive territory. The CSI 300 and Shanghai Composite posted gains of 2.14% and 2.31%, respectively.

Commodities Rally on China Data and Russia Sanctions

Commodities had a positive week ending January 17. China’s economic data boosted iron ore demand sentiment. Iron ore spot jumped 4.61% in the week. Gold ended the week up 0.52% to $2,702. Expectations of Trump’s policies fueling inflation drove demand for gold as an inflation hedge.

Meanwhile, crude oil surged on news of US sanctions on Russian energy trade.

ASX 200 Edges Higher on Commodity Gains

Australia’s ASX 200 gained 0.20% in the week ending January 17. Commodity price gains drove demand for gold, oil, and mining-related stocks. However, banking and tech-related stocks limited the upside.

Northern Star Resources Ltd. (NST) jumped by 5.31% on rising gold prices. Fortescue Metals Group (FMG) and BHP Group Ltd. (BHP) gained 7.19% and 0.93%, respectively, on higher iron ore prices.

Meanwhile, the S&P/ASX 200 All Technology Index dropped 2.09% in the week, with banking stocks also posting losses.

Nikkei Index Stumbles on BoJ Rate Hike Bets

In the week ending January 17, the Nikkei Index slid by 2.19%, bucking the broader market trend. Rising bets on a January Bank of Japan (BoJ) rate hike led the USD/JPY pair down 0.91%. The stronger Yen weighed on Japan’s export-linked stocks. A stronger Yen could weaken earnings and valuations for export-focused companies.

Notable movers included Tokyo Electron (8035) and Softbank Group (9984), which fell 1.37% and 1.85%, respectively. Nissan Motor Corp. (7201) tumbled 6.31%.

Outlook: Policy and Geopolitics in Focus

With policy decisions looming, markets remain poised for increasing volatility; stay ahead of the curve.

Key developments this week include Trump’s inauguration, the Bank of Japan’s monetary policy decision, and central bank forward guidance. Rising geopolitical tensions and hawkish central bank commentary could weigh on sentiment, while targeted Chinese stimulus and easing US private sector activity could signal a more dovish Fed.

Traders should closely monitor economic trends to navigate shifting dynamics. For more analysis on the Hang Seng Index and global market trends, click here.