Hang Seng Index and ASX 200: Fed Bets, Trade Truce Fuel Weekly Gains – Weekly Recap

Wall Street Gets Relief as Trade Truce and Fed Bets Lift Sentiment

Wall Street roared back in the week ending May 16, buoyed by a surprise de-escalation in the US-China trade war and renewed hopes for a 2025 Fed rate cut. The Nasdaq Composite Index surged 7.15%, while the Dow and the S&P 500 gained 3.41% and 5.27%, respectively.

Trade Truce Revives Risk Appetite

On Monday, May 12, the US and China announced a 90-day trade truce, boosting demand for risk assets. Tariffs on Chinese goods dropped from 145% to 30%, while China cut levies on US goods from 120% to 10%. The shift in trade tensions eased fears of stagflation.

US Inflation Trends Support Fed Pivot

US economic data added fuel to the rally. The annual US inflation rate eased from 2.4% in March to 2.3% in April as consumer prices rose less than expected month-on-month. Producer prices signaled a softer inflation outlook, increasing 2.4% year-on-year in April compared with 3.4% in March.

The figures bolstered market bets on a Fed pivot, tempering earlier concerns about tariff-driven price shocks.

Hang Seng Index Logs Fifth Weekly Gain

Asian equities benefited from easing trade tensions and rising Fed cut expectations. The Hang Seng Index climbed 2.09% in the week ending May 16, marking five consecutive weekly gains. However, mixed corporate earnings and reports of the US expanding its export blacklist limited the upside.

• Auto and tech stocks led the gains.
• The Hang Seng Tech Index rose 1.95%. Baidu (09888) ended the week up 4.67%, while Alibaba (09988) slipped 0.16% after missing earnings estimates.
• In the EV space, Li Auto (02015) jumped 9.06%, with BYD Company (01211) soaring 12.20%

Commenting on sentiment late in the week, Brian Tycangco of Stansberry Research noted:

“Chinese tech names in HKEXGroup ended well off the day’s lows post BABA 4QFY25 results miss. Alibaba closed 2.2% higher than its ADR close. A good sign. There’s some noise about US chip sanctions on Chinese cos but that’s all it is – noise. Focus on brighter outlook for China’s economy and less volatility in global trade atmosphere.”

Mainland China’s equity markets rose to eight-week highs before settling with modest gains. The CSI 300 advanced 1.12%, while the Shanghai Composite Index added 0.76%.

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

Commodities React to Trade Optimism and Iran News

• Gold slid 3.75%, closing the week at $3,202 as trade developments eased demand for safe-haven assets.
• WTI crude oil gained 2.05% to settle at $61.705. News of President Trump considering a US-Iran nuclear deal countered hopes of rising demand, capping the weekly gains.
• Iron ore spot prices rose 3.91% as the US-China trade truce raised demand expectations.

ASX 200 Extends Winning Run

The ASX 200 rose 1.37% in the week, buoyed by five consecutive daily gains. Tech, oil, and mining stocks led the way.

• Woodside Energy Group Ltd. (WDS) soared 7.45% as easing trade tensions signaled a potential demand boost.
• The S&P/ASX All Technology Index extended its winning streak to six weeks.
• Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) advanced on rising iron ore spot prices.
• Meanwhile, Northern Star Resources (NST) ended the week down 6.27% as gold prices retreated.

Nikkei Climbs on Trade Talks and BoJ Policy Bets

The Nikkei 225 Index edged 0.15% amid hopes for a US-Japan trade deal and fading bets on a Bank of Japan rate hike. However, a steady Japanese Yen capped broader gains. The USD/JPY pair rose 0.18% in the week but settled well below the May 12 high of 148.647

Nissan Motor Corp. (7201) advanced 3.81%, while Softbank Group (9984) rallied 4.18%.

Looking Ahead: Key Catalysts to Watch

The coming week will be pivotal for Asian markets. Investors will monitor US trade negotiations with China and Japan. The Reserve Bank of Australia announces its rate decision on May 20, with markets expecting three cuts in 2025. Key data from Australia, China, and Japan will further shape risk sentiment.

On May 19, retail sales, industrial production, unemployment, housing, and fixed asset investment numbers from China will set the tone for the week. Upbeat numbers could ease concerns about US tariffs impacting China’s economy, potentially driving the Hang Seng Index and Mainland China’s equity markets higher.

In an evolving environment, staying updated on trade, policy, and central bank moves remains vital. Access deeper Hang Seng insights here.