Hang Seng Index: China Stimulus, Trade Hopes Lift Stocks – Weekly Recap

Wall Street Retreats as Fed Outlook and Tariff Threats Rattle Markets

Wall Street’s winning streak ended as US-China trade talk jitters and hawkish Fed signals left investors bracing for turbulence. A proposed 100% tariff on foreign-made films jolted sentiment just as markets prepared for pivotal trade talks and a data-heavy week.

The Nasdaq Composite Index fell 0.27%, while the Dow and the S&P 500 dropped 0.16% and 0.47%, respectively.

Despite renewed tensions, a US-UK trade deal briefly lifted market sentiment. Additionally, plans to lift AI chip restrictions and upbeat corporate earnings helped limit the weekly losses. Notably, Disney (DIS) surged 14.54% after beating earnings estimates.

Economic Indicators Sink Fed Rate Cut Bets

US economic data and Fed Chair Powell impacted hopes for a June Fed rate cut. The ISM Services PMI rose to 51.6 in April, up from 50.8 in March, driven by increasing prices. As a key contributor to underlying inflation, higher services inflation may delay Fed rate cuts.

Fed Chair Powell also signaled a wait-and-see policy stance during the FOMC press conference and warned of stagflation risks. A higher-for-longer rate path could raise borrowing costs, potentially affecting corporate earnings.

China Data Triggers Stimulus Roll Out

China’s Caixin Services PMI fell from 51.9 in March to 50.7 in April, reflecting the early effects of the US-China trade war. New business rose at the softest pace in 28 months, and firms cut staffing levels for the second month, potentially undermining the effectiveness of Beijing’s stimulus.

Beijing responded to the April PMI data by cutting interest rates and lowering the Reserve Requirement Ratio (RRR) from 6.6% to 6.2%. The PBoC also launched RMB300 billion in re-lending for tech innovation and upgrades and temporarily slashed the RRR to 0% for tariff-hit auto finance and leasing companies.

Beijing introduced the measures ahead of Wednesday’s Fed interest rate decision and US-China trade talks, set to begin on May 10.

Trade Data Shows Resilience Despite US Tariffs

April export figures highlighted China’s trade resilience. Exports rose 8.1% year-on-year in April, down from 12.4% in March but higher than an expected 1.9% increase. Imports outperformed expectations, slipping only 0.2% (March: -4.3%) versus forecasts of a 5.9% decline.

April’s data suggested that US tariffs may have less of an impact on China’s economy than previously feared.

Hang Seng Index Extends Winning Streak

While US markets struggled, Asian markets posted mixed results. The Hang Seng Index climbed 1.61% in the week ending May 9, extending its winning streak to four weeks. Beijing’s stimulus measures and easing US-China tensions drove demand for Hong Kong-listed stocks.

EV-related stocks contributed to the gains, while the housing and tech indexes ended the week with heavy losses.

• EV stocks: Geely Automobile Holdings (00175.HK) soared 10.07%, Li Auto Inc. (02015.HK) rallied 5.22%, while BYD Co. Ltd. (01211.HK) gained 1.2%.
• The Hang Seng TECH Index dropped 1.22%, while the Hang Seng Mainland Properties Index slid 3.73%.
• Tech giant Baidu (09888.HK) fell 3.32%, while Alibaba (09988.HK) gained 1.31%.

Mainland China’s equity markets climbed to five-week highs on trade optimism. The CSI 300 rallied 2%, while the Shanghai Composite Index gained 1.92%.

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

Commodities React to Trade Developments

• Gold recovered losses from the previous week, gaining 2.88% to close the week at $3,327 amid market caution.
• WTI crude oil prices rallied 4.38% on signs of thawing trade tensions.
• Iron ore spot prices fell 1.01% as investors awaited clarity from US-China trade talks.

ASX 200 Declines Despite Tech Sector Strength

The ASX 200 snapped a three-week winning streak, falling 0.08% in the week ending May 9. Banking and mining stocks offset gains in tech and gold sectors.

• The S&P/ASX All Technology Index extended its winning streak to five weeks, rallying 2.5%.
• Northern Star Resources advanced 3.13% on rising gold prices.
• Meanwhile, ANZ and Westpac tumbled 4.55% and 6.7%, respectively, after earnings misses.
• BHP Group Ltd. and Rio Tinto Ltd. fell 1.42% and 1.44% on falling iron ore spot prices.

Nikkei Rises on Yen Weakness and Trade Hopes

The Nikkei 225 Index surged 3.61%, driven by trade optimism and a weaker Japanese Yen. The USD/JPY pair rose 0.28% to close at 145.362, increasing the competitiveness of Japanese exporters.

Tech stocks led the charge, with Tokyo Electron (8035) surging 6.69% and Softbank Group (9984) gaining 0.19%.

Looking Ahead: Trade Talks and Economic Data in Focus

Investors should closely track trade headlines and central bank rhetoric. Key data releases next week include the US CPI Report and retail sales, Aussie labor market data, Japan’s GDP, and the Bank of Japan’s Summary of Opinions.

On Saturday, inflation data from China signaled a potential weakening in demand.

While the economic data will influence risk sentiment, trade developments remain a primary market driver.

In a volatile landscape, staying updated on trade, policy, and central bank moves remains critical. Access deeper Hang Seng insights here.