Hang Seng Index: Tech-Led Gains as China Stimulus and Trade Optimism Lift Mood

US Markets Gain on Fed Hold, AI Optimism, and Earnings

Wall Street staged a late recovery on Wednesday, May 7, as blockbuster earnings and optimism over AI regulation ignited risk appetite and reversed prior session losses. The Dow gained 0.70%, while the Nasdaq Composite Index and the S&P 500 advanced 0.27% and 0.43%, respectively.

Reports that the Trump administration plans to lift AI chip restrictions bolstered demand for semiconductor stocks. Disney (DIS) shares soared 10.76% after topping earnings estimates, sending the Dow higher.

Earlier in the session, the Fed left interest rates unchanged at 4.5%, with Fed Chair Powell signaling a wait-and-see policy stance, weighing on market sentiment. Optimism around AI regulations and earnings reversed the Fed-driven dip.

Beijing Stimulus Boosts Sentiment Ahead of Talks

Beijing introduced fresh stimulus on Wednesday, May 7, driving demand for risk assets. The People’s Bank of China cut interest rates and reduced the Reserve Ratio Requirement (RRR) to bolster China’s economy ahead of US trade talks.

New measures included lowering the RRR from 6.6% to 6.2%, trimming the Standing Lending Facility rates by 10-basis points, and launching RMB 300 billion in re-lending for tech innovation and upgrades. Additional steps targeted the auto and leasing sectors and firms impacted by tariffs. Beijing also pledged to introduce further policies to support capital market stability.

Wednesday’s announcements came ahead of planned US-China trade talks, likely to start on Saturday, May 10.

Hang Seng and Mainland China Markets Gain Ahead of Trade Talks

On Thursday, May 8, Asian equity markets rallied on stimulus optimism and renewed hopes for a US-China trade agreement. The Hang Seng Index gained 1.08% in the morning session, led by tech and EV stocks.

• The Hang Seng Tech Index gained 1.54%, with Alibaba (09988.HK) up 1.90%.
• EV stocks, components of the Tech Index, also advanced. Li Auto (02015.HK) jumped 7.33%, and BYD Electronic International (HK00285) added 2.23%.

BYD sales in Germany reportedly jumped 750% to 1,566 year-on-year in April, outselling Tesla (TSLA) for the first time.

Mainland China’s CSI300 and Shanghai Composite rose 0.75% and 0.38%, respectively, supported by expectations of further easing and trade progress.

Nikkei 225 Gains on US Trade Optimism, Yen Caps Upside

Japan’s Nikkei 225 rose 0.45% on Thursday morning. News of a US-UK trade deal fueled hopes of a US-Japan trade agreement, supporting demand for Japanese stocks. However, a stronger Japanese Yen capped gains, as it typically weighs on exports and corporate earnings. The USD/JPY fell 0.15% to 143.606, extending losses from the previous session.

Notable movers included Tokyo Electron (8035), which rallied 2.24%. In contrast, Nissan Motor Corp. (7201) fell 0.65%, while Sony Corp. (6758) dropped 2.40%.

ASX 200 Follows Wall Street, Banks Weigh on Gains

Australia’s ASX 200 advanced 0.33% in morning trade, supported by gold and tech stock gains. Northern Star Resources (NST) jumped 2.68%, with the S&P/All Tech Index rising 1.57%.

However, disappointing bank earnings limited the upside. ANZ (ANZ) slid 2.15% after missing earnings expectations, dragging the broader sector into the red.

Outlook: All Eyes on US-China Talks and Policy Signals

A breakthrough in US-China trade talks may boost risk sentiment and weigh on safe-haven assets like gold and the Yen. Beijing’s latest pledges indicate scope for more stimulus if needed.

Still, macro uncertainty remains high. A breakdown in talks could revive demand for defensive assets. Traders should stay agile, with strategies aligned to evolving central bank signals and trade policy developments.

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