Hang Seng Index Leads Asian Gains on US-China Trade Optimism

US Markets Extend Losses Amid Tariff and Fed Jitters

Wall Street slumped on Tuesday, May 6, as investors braced for fresh Fed signals and tariff headwinds, reigniting fears of sticky inflation and tighter financial conditions. The Dow fell 0.95%, while the Nasdaq Composite Index and the S&P 500 slid 0.87% and 0.77%, respectively, as rate jitters and trade tensions rattled sentiment.

The lack of trade progress could prompt the Fed to maintain a hawkish stance to address potential tariff-driven inflation. A higher-for-longer Fed rate path may raise borrowing costs, potentially denting corporate earnings and risk appetite.

President Trump added to the gloom, warning of potential tariffs on pharmaceutical goods.

US-China Trade Talks in Focus

Overnight, reports of US Treasury Secretary Scott Bessent planning to meet with China’s Vice Premier to discuss trade boosted risk sentiment. CN Wire reported:

“Ministry of Commerce: China has carefully evaluated the information provided by the United States. After fully considering global expectations, China’s interests, and the appeals of the U.S. industry and consumers, China has decided to agree to engage with the United States.”

China’s Vice Premier He Lifeng will reportedly hold talks with Treasury Secretary Bessent during a May 9-12 visit to Switzerland. The news triggered hopes for an end to the US-China trade war, setting the stage for an upbeat Asian market session on Wednesday, May 7.

Hang Seng and Mainland China Markets Rally on Trade Headlines

Trade headlines boosted demand for Asian-listed stocks on Wednesday, May 7. The Hang Seng Index rallied 1.51% in the morning session, led by housing and tech stocks.

• The Hang Seng Mainland Properties Index gained 2.32%, while the Hang Seng Tech Index rose 1.27%.
• Tech giants Alibaba (09988.HK) and Baidu (09888.HK) advanced 0.65% and 1.99%, respectively.

Mainland China’s CSI300 and Shanghai Composite gained 0.46% and 0.54%, respectively.

Brian Tycangco, editor at Stansberry Research, commented:

“China agrees to hold “highest level” talks with the US on trade. I’m hopeful but can’t avoid setting low expectations.”

Nikkei 225 Steady as Trade News Offsets Yen Strength

Japan’s Nikkei 225 slipped 0.05% on Wednesday morning as optimism on U.S.-China talks countered the impact of a stronger Yen. However, USD/JPY was down substantially since Friday’s closing 144.953, currently at 143.137. A stronger Yen may weigh on exports and earnings.

Notable movers included Nissan Motor Corp. (7201), down 2.63%, while Sony Corp. (6758) plunged 3.46%.

ASX 200 Gains on Bank and Mining Stocks

Australia’s ASX 200 advanced 0.19% in morning trade, supported by strong earnings from banks and rising iron ore prices. Risk-on sentiment pressured gold, limiting its gains.

National Australia Bank (NAB) rallied 1.99% after beating earnings estimates, while ANZ (ANZ) rose 0.44%.

Hopes of a US-China trade deal sent iron ore spot prices 1.41% higher overnight, driving demand for mining stocks. BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) advanced 1.32% and 1.28%, respectively.

Outlook: Trade, Stimulus, and Central Bank Cues

Progress on trade or dovish Fed guidance could lift risk appetite, while continued policy uncertainty or hawkish rhetoric may drive demand for safe-haven assets like gold and the Yen. Traders should remain flexible as macro signals evolve.

As volatility persists, traders may benefit from strategies aligned with evolving global macro signals. For more, see our full market coverage.