Hang Seng Index Up on Beijing News; ASX and Nikkei Drop on Tariff Woes – Weekly Recap

US Markets Slide Amid Economic and Tariff Uncertainties

US equity markets declined in the week ending March 7. President Trump’s flip-flopping on tariff policies and growing recession fears weighed on investor sentiment.

The Nasdaq Composite Index and the S&P 500 extended their losing streaks to three weeks, sliding 3.45% and 3.10%, respectively. Meanwhile, the Dow reversed its previous week’s gains, dropping 2.37%.

President Trump raised tariffs on Chinese imports to 20% while imposing 25% tariffs on Canada and Mexico, triggering risk aversion. However, a last-minute delay on certain Canadian and Mexican levies fueled market uncertainty, weighing on US indexes.

US Economic Indicators Fuel Recession Fears and Fed Rate Cut Bets

US economic data fueled speculation about a US economic recession while raising the chances of three 2025 Fed rate cuts. Key stats from the week included:

• ISM Manufacturing PMI dropped from 50.9 in January to 50.3 in February, with new orders and employment sub-indexes falling below the crucial 50 threshold.
• ADP reported a modest 77k job increase in February, down sharply from 186k in January.
• Challenger Gray Report showed 172k job cuts in February, the highest monthly increase since 2009.
• US nonfarm payrolls rose by 140k in February after a modest 81k increase in January.
• US unemployment rate climbed to 4.1% in February, up from 4% in January.
• Average hourly earnings increased by 4% year-on-year, up from 3.9% in January.

Despite an upbeat ISM Services PMI, a weaker labor market and sluggish manufacturing data fueled recession jitters. According to Kalshi, the odds of a 2025 US recession stood at 40%, up from 17% in January.

Meanwhile, the softer data raised bets on Fed rate cuts in June, September, and December, offering some support to risk assets.

China Retaliates to US Tariffs and Pledges Stimulus

On March 4, China responded to Trump’s tariff hikes with selective retaliatory tariffs on US agricultural imports, effective March 10. Beijing also introduced non-tariff retaliatory measures, further escalating the US-China trade war. The escalation coincided with the third session of the 14th National People’s Congress (NPC), where policymakers outlined their economic priorities for 2025. Key announcements included:

• A growth target of around 5%.
• A consumer inflation target of 2%, up from 0.2% in 2024.
• Special initiatives to boost consumption.
• Cut required reserve ratios and interest rates when appropriate.
• Use monetary policy instruments to bolster property and stock markets.
• Issue special treasury bonds to support state-owned lenders in replenishing capital.
• A 500 billion Yuan NDRC pledge for equipment upgrades and trade-in programs.
• Plans to provide free preschool education and childcare subsidies.

China PMIs and Trade Data Send Mixed Signals

Meanwhile, China’s latest economic data painted a mixed picture. The influential Caixin Manufacturing and Services PMI suggested a potential recovery in private-sector activity, supporting China’s growth target. Trade data signaled weaker demand as imports tumbled and exports waned. However, Beijing’s stimulus pledges tempered investor fears and bolstered risk appetite.

Hong Kong and Mainland China Markets Rally on Stimulus Optimism

The Hang Seng Index reversed losses from the previous week, rallying 5.62%. Investors brushed aside President Trump’s tariff hikes in favor of Beijing’s stimulus efforts.

The Hang Seng Mainland Properties Index extended its gains from the previous week, rising 5.25%, while the Hang Seng Technologies Index surged 8.43%. Notably, Alibaba (9988) and Baidu (9888) posted weekly gains of 9.80% and 8.74%, respectively.

Mainland China equity markets also climbed higher in the week ending March 7. The CSI 300 and Shanghai Composite Index advanced by 1.39% and 1.56%, respectively. However, the gains were more modest as trade war concerns lingered.

Brian Tycangco, editor and analyst at Stansberry Research, summed up the week’s developments:

“China is ‘collapsing upwards.’ Manufacturing PMI expanding. Services PMI expanding. Monetary supply at ATH. Property market stabilizing. HSI at a 3yr high.”

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

Commodities: Gold Advances as Iron Ore and Crude Oil Slide

Commodity markets had a mixed week, influenced by risk sentiment and supply-demand dynamics:

• Gold advanced by 1.83% in the week ending March 7, closing at $2,910. Expectations of a more dovish Fed and recession fears drove prices higher.
• Iron ore prices dropped by 2.14% after the previous week’s 5.41% slide amid tariff uncertainty and demand concerns.
• Crude oil tumbled 4.24% to $66.635 after OPEC+ announced supply increases while US inventories soared.

ASX 200 Mirrors US Market Set Back

The ASX 200 slid by 2.74% in the week ending March 7, marking its third consecutive weekly loss. Tariff concerns, weak US data, and commodity prices dragged the Index into the red. Banking, oil, and tech stocks led the losses.

• The S&P/ASX All Technology Index dropped by 2.12%.
• Woodside Energy Group (WDS) tumbled 9.20%.
• Commonwealth Bank of Australia (CBA) led the banking sector losses, sliding 5.26%.

Nikkei Index Slumps on Tariff Woes and Yen Strength

The Nikkei Index ended the week down 1.94%. A stronger Japanese Yen pressured Japanese stocks as the USD/JPY slid by 1.71% to end the week at 148.033, reducing the overseas earnings of Japanese corporations.

• Tokyo Electron (8035) and Softbank Group (9984) dropped 4.56% and 3.87%, respectively.
• Sony Group Corp. (6758) fell 4.55%.
• Meanwhile, Nissan Motor Co. (7201) advanced by 2.19% on Trump’s tariff exemption for certain automakers.

Market Outlook: Key Events to Watch

The upcoming week could be crucial for the Asian markets. Economic data, central bank forward guidance, and tariff developments will be focal points. Key events include:

• US tariffs: Trump’s shifting stance remains a key risk factor for global markets. Any further policy shifts will influence investor sentiment.
• Beijing stimulus: Additional stimulus measures from China could offset the negative impact of US tariffs, particularly in the wake of the National People’s Congress.
• Bank of Japan Policy Stance and USD/JPY Trends: The spring wage negotiations (Shunto), key economic indicators, and BoJ chatter could influence USD/JPY trends and Japanese stocks. Rising Japanese Government Bond (JGB) yields may raise the threat of a Yen carry trade unwind, impacting risk assets.

With ongoing economic uncertainty and volatile market conditions, traders should closely monitor macroeconomic trends and policy shifts here to navigate risks effectively.