Hang Seng Dips, Nikkei Gains as Trade Signals Drive Divergent Moves

Wall Street Reels as Trump Renews Tariff Threats

US markets slumped as investors reacted to President Trump’s latest tariff threat, sinking hopes of an end to the global trade war. The Nasdaq Composite Index slid 1%, while the Dow and S&P 500 dropped 0.61% and 0.67%, respectively.

On Friday, Trump threatened the EU with a 50% tariff, effective June 1, triggering a flight to safety. The prospect of a US-EU trade war overshadowed upbeat US housing sector data.

The negative sentiment spilled into the Asian session on Monday, May 26.

China Pours Cold Water on Trade Deal Optimism

While easing US-China trade tensions had raised hopes of a breakthrough, China’s state media struck a cautious tone. CN Wire reported:

“China must maintain a clear-eyed understanding of the challenges ahead, noting the U.S. may adopt delaying tactics to mitigate its economic losses. Given the enduring and complex nature of the confrontation, China must not only prepare thoroughly for negotiations but also brace for a prolonged struggle.”

China’s state media also suggested Trump could reignite tensions if US political and economic pressures recede. Though the US and China recently agreed to a 90-day tariff pause, a lack of progress may spook investors as the deadline approaches.

Brian Tycangco, editor at Stansberry Research, commented:

“As I’ve said previously, we just had a pause- not a deal. China isn’t under any illusion that this is an easy road to travel. Get ready for more volatility.”

Hang Seng Index Dips Amid Tariff Uncertainty

Asian equities opened mixed on May 26 as investors considered the latest trade developments. The Hang Seng Index dropped 0.40% in early trade. Real estate and tech stocks came under selling pressure, contributing to the losses.

The Hang Seng Mainland Properties Index fell 0.10%, while the Hang Seng Tech Index rose 0.32%. Meanwhile, EV carmakers cushioned the downside, with BYD Corp. (01211) and Li Auto (02015) rallying 1.97% and 1.07%, respectively.

Mainland China’s equity markets posted modest losses. The CSI 300 declined 0.17%, while the Shanghai Composite edged 0.05% lower.

Nikkei 225 Advances on US-Japan Trade Deal Optimism

Japan’s Nikkei 225 gained 0.88% on Monday morning as investors reacted to US-EU trade headlines. On May 25, President Trump postponed the 50% tariff on EU goods from June 1 to July 9, suggesting a more amenable stance on trade. The US and Japan could resume trade talks as Japan’s top trade negotiator Ryosei Akazawa prepares to visit Washington.

The delay to EU tariffs lifted the USD/JPY pair by 0.05% to 142.619, supporting export-oriented stocks. A softer Yen may improve Japan’s export competitiveness and corporate earnings.

Tech stocks led the gains, with Tokyo Electron (8035) and Softbank Group (9984) advancing 1.96% and 1.49%, respectively.

ASX 200 Slips as US Treasury Yields Pressure Banks

Australia’s ASX 200 slipped 0.09% in the morning session as elevated US Treasury yields weighed on demand for high-yielding Aussie bank stocks. Commonwealth Bank of Australia fell 0.43%, while ANZ slid 1.08%.

Meanwhile, Northern Star Resources rallied 0.81%, following gold’s 1.89% surge on May 23.

Outlook: Trade Talks, Stimulus, and Geopolitical Risks

Volatility remains elevated amid fiscal uncertainty and tariff concerns. US-China negotiations will remain central to near-term sentiment. Easing tensions could lift risk assets, but any setback may trigger further sell-offs.

Investors should monitor stimulus cues from Beijing and global central banks. Fresh policy support could buoy regional equities.

Could Beijing’s next move shock global markets? To stay ahead of market-moving headlines—follow our live coverage for real-time updates on US-China trade talks, global stimulus policies, and central bank signals.