Hang Seng Index News: China PMI Beats Forecasts, But Tariffs Challenge Optimism

Fed Rate Cut Expectations and Tariff Uncertainties Test Sentiment

Fed Chair Powell’s overnight speech failed to cool Fed rate cut expectations for September, bolstering demand for Hong Kong-listed stocks. Better-than-expected US economic data eased recession fears and gave Fed Chair Powell room to delay cuts. Trade headlines also tempered sentiment as President Trump’s July 9 tariff deadline loomed.

On Wednesday, July 2, the Hang Seng Index reopened after the July 1 holiday, with early gains. Real estate stocks advanced, offsetting losses across electric vehicle (EV) and tech stocks.

Economic data, trade headlines, central bank policy cues, and stimulus news will continue to drive market sentiment. These factors would likely dictate whether the Hang Seng Index will drop below 24,000 or break above 24,500.

Hang Seng Index Climbs on Fed Rate Cut Hopes

US equity markets were mixed on July 1 as a non-committal Fed Chair and concerns about the One Big Beautiful Bill Act (OBBB) tested risk appetite. The Nasdaq Composite Index fell 0.82% while Dow advanced 0.91%. Meanwhile, the Hang Seng Index climbed 0.56% to 24,207 in morning trading on Wednesday, July 2.

EV and tech stocks came under selling pressure, tracking the Nasdaq’s overnight losses, capping the upside.

Mainland China markets were also under water in early trading. The CSI 300 and Shanghai Composite Index posted morning losses of 0.06% and 0.09%, respectively. Concerns about US tariffs impacting external demand weighed on Mainland-listed stocks.

EV and Tech Stocks Struggle

EV stocks continued to face selling pressure after recent reports of Chinese EV makers double-counting sales by exporting ‘zero mileage’ used cars. Concerns about profit erosion amid intensifying competition also weighed on sentiment.

BYD (01211) and Li Auto (02015) dropped 0.08% and 2.43%, respectively. BYD faces a five-day losing streak. Tech giants Alibaba (09988) and Tencent (00700) fell 0.82% and 0.09%, respectively, dragging the Hang Seng TECH Index down 0.36%.

Fed Watch: What’s Priced In?

Fed Chair Powell failed to guide markets on the timing of the Fed’s next rate cut, stating:

“Not going to rule in or rule out any particular meeting. Officials will be monitoring, particularly, what does show up in terms of inflation or what does not show up.”

Nick Timiraos, Chief Economics Correspondent at The Wall Street Journal, remarked:

“The ill-placed focus (today, at least) on July could obscure a more subtle shift in his and others’ comments in recent weeks. Immediately after Liberation Day tariff announcements, there was a presumption that price increases might be so large as to require evidence of material labor-market weakness before cutting.”

Timiraos added:

“More recently, as tariff hikes have been suspended and early (too early?) inflation readings have not shown meaningful effects, Powell has hinted at a presumption that cuts could resume if inflation isn’t as bad as feared.”

Powell spoke ahead of crucial US service sector data and the highly influential US Jobs Report, which could influence the Fed rate path.

According to the CME FedWatch Tool, the probability of a September Fed rate cut slipped from 91.4% to 91.1% on July 1.

Meanwhile, US economic data from July 1 eased fears of a US recession. JOLTs job openings unexpectedly increased from 7.395 million in April to 7.769 million in May, signaling a resilient labor market. The manufacturing sector contracted at a slower pace, with the ISM Manufacturing PMI up from 48.5 in May to 49 in June.

China Stimulus Lifts PMI but Tariffs Loom

China’s manufacturing sector data indicated Beijing’s stimulus measures gained further traction in June. The Caixin Manufacturing PMI rose from 48.3 in May to 50.4 in June. A pickup in domestic demand triggered a rebound in productivity, lifting the PMI above the neutral 50 mark.

However, weak external demand and deteriorating labor market conditions were red flags for Beijing, aiming to boost household spending. With export orders dropping for the third consecutive month, US tariffs could challenge Beijing’s 5% GDP target.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero remarked:

“The apparent progress in trade between the US and China has not excited Chinese markets due to the lack of concrete details and poor economic data, such as the 9.1% drop in corporate profits. If the agreement is limited only to reducing controls on rare earth exports, without significant tariff reductions, currently up to 51%, it will not be enough to boost Chinese growth.”

Technical Setup: 24,500 Resistance or Drop Below 24,000 as Tariff Deadline Looms

On July 2, the Hang Seng Index traded near June highs, above the May-June congestion zone. The Index also remained above its 50-day Exponential Moving Average (EMA), sending bullish price signals.

The removal of US tariffs could send the Index toward the June high of 24,533. A sustained move above 24,533 may bring the March high of 24,874 into play. Conversely, a break below 24,000 could expose 23,500 and the 50-day EMA.

Hang Seng Technical Outlook

• Resistance: 24,533, and then 24,874.
• Support: 24,000, 23,500, then the 50-day EMA at 23,471.
• Short-term Bias: Bullish but hinged on US-China trade headlines, US economic data, and central bank policy signals.

Hang Seng Outlook: Will the Index Break 24,500 or Drop Below 24,000?

The Hang Seng Index continues to trade above its recent congestion range and the 50-day EMA on easing US-China trade tensions.

While trade developments are market-positive, US tariffs may continue affecting China’s manufacturing sector and the broader economy. US tariffs and the absence of stimulus support from Beijing may impact risk assets, potentially dragging the Index below 24,000. Conversely, removing tariffs could lift sentiment, driving the Index toward the March high of 24,874.

What’s next for the Hang Seng? Stay informed with real-time updates as geopolitical risks and US-China developments drive sentiment. Follow our live coverage and consult our economic calendar.