Hang Seng Index: Gains on PBoC Rate Cut and Easing Trade Tensions – Weekly Recap

Wall Street Slides on Renewed Trade Tensions and US Debt Jitters

US markets fell in the week ending May 23 as renewed trade tensions and US debt worries triggered a flight to safety. On Friday, US President Trump recommended a 50% tariff on EU goods, stating:

“The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with. Their powerful Trade Barriers, Vat Taxes, ridiculous Corporate Penalties, Non-Monetary Trade Barriers, Monetary Manipulations, unfair and unjustified lawsuits against Americans, Companies, and more, have led to a Trade Deficit with the U.S. of more than $250,000,000 a year, a number which is totally unacceptable.”

Concerns about US debt lingered after Moody’s downgraded the US sovereign credit rating from Aaa to Aa1.

The Nasdaq Composite Index fell 2.47%, while the Dow and the S&P 500 dropped 2.47% and 2.61%, respectively.

In the bond markets, 10-year US Treasury yields soared to a high of 4.627% before settling at 4.509%, reflecting concerns about US fiscal stability.

China Data Prompts PBoC Rate Cut

Economic data from China raised concerns about China’s economic momentum on May 19. While unemployment fell, retail sales growth slowed sharply in April, suggesting the US-China trade war impacted sentiment. Weakening sentiment could challenge Beijing’s efforts to boost domestic demand and consumption.

The People’s Bank of China (PBoC) reacted to the data, cutting the 1-year and 5-year loan prime rates (LPR) by 10 basis points to 3% and 3.5%, respectively. The move boosted demand for Hong Kong-listed stocks.

US-China Trade Tensions Ease, Lifting Optimism

Easing US-China trade tensions also bolstered demand for Hong Kong-listed stocks. CN Wire reported a meeting between China’s Vice Premier He Lifeng and JPMorgan Chase CEO Jamie Dimon. He Lifeng expressed support for deeper US business ties.

Reports of Chinese Vice Foreign Minister Ma Zhaoxu holding a call with US Deputy Secretary Kurt Campbell on May 22 also raised hopes of further progress toward a trade deal. The two parties agreed to maintain ongoing dialogue.

Hang Seng Index Notches Sixth Straight Weekly Gain

Asian equities delivered mixed results amid debt concerns, central bank maneuvers, and trade developments. The Hang Seng Index advanced 1.10% in the week ending May 23, marking its sixth consecutive weekly gain. However, risk-off sentiment in broader global markets capped the gains.

Automakers contributed to the upside, with BYD Company Ltd. (01211) surging 7.14%, while Geely Automobile Holdings Ltd. (00175) gained 2.84%. However, tech stocks came under heavy selling pressure, with Alibaba (09988) sliding 3.73% after posting disappointing 4QFY25 earnings results.

Mainland China’s equity markets underperformed as concerns about the economic outlook weakened sentiment. The CSI 300 slipped 0.18%, while the Shanghai Composite Index dropped 0.57%.

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

Commodities React to Risk Environment

• Gold rallied 4.84%, closing the week at $3,356.66 as trade tensions and US debt concerns drove demand for safe-haven assets.
• WTI crude oil fell 0.53% to settle at $61.375 amid oversupply concerns.
• Iron Ore spot declined 1.44% as weak economic indicators from China weighed on the demand outlook.

ASX 200 Extends Gains as RBA Cuts Rates

The ASX 200 advanced 0.21% in the week despite ending an eight-day winning streak. Tech, gold, and banking stocks led the gains.

• The S&P/ASX All Technology Index climbed 1%, boosted by the RBA’s dovish rate cut.
• Northern Star Resources soared 9.82% as gold prices rallied sharply.
• Commonwealth Bank of Australia rose 2.46%, while National Australia Bank advanced 1.86%.

Nikkei Slips on Inflation Surge and Yen Strength

The Nikkei 225 Index lost 1.1% as rising inflation and a stronger Yen weighed on Japan-listed stocks.

Underlying inflation accelerated from 3.2% in March to 3.5% in April, while inflation ex-food and energy rose from 2.9% to 3%, fueling speculation about a Q3 2025 Bank of Japan rate hike. Rising demand for the Yen left USD/JPY down 2.11% at 142.551 for the week. A stronger Yen can impact Japan’s competitiveness in the export markets and affect corporate earnings.

Nissan Motor Corp. (7201) fell 0.81%, while Softbank Group (9984) and Tokyo Electron (8035) slid 3.43% and 3.03%, respectively.

Outlook: Data and Trade Talks in Focus

Markets face a pivotal week ahead. Trump’s proposed EU tariffs will influence global sentiment.

Key data from the US, Australia, and Japan will also dictate risk appetite. Australia’s CPI and retail sales will impact RBA policy expectations and Aussie-listed stocks. Japanese labor and retail figures may guide Yen direction and Nikkei momentum. Meanwhile, US GDP, inflation, and consumer confidence data will steer Fed rate cut bets and regional market trends, including the Hang Seng Index.

In this evolving landscape, tracking trade, central bank actions, and key data will be critical. Access deeper Hang Seng insights here.