Hang Seng and Nikkei 225: US Tariffs and PBoC Policy Keep Markets Under Pressure

US Markets: Nasdaq Climbs as NVIDIA Earnings Loom Amid Global Market Caution

On Tuesday, November 19, US equity markets had another mixed session. The Nasdaq Composite Index and the S&P 500 extended their gains from Monday, advancing by 1.04% and 0.40%, respectively. However, the Dow bucked the trend for the second session, falling 0.28%.

Super Micro Computer (SMCI) continued making headlines, surging by 31%, while Tesla (TSLA) gained 2.14%. Expectations for the Trump administration easing self-driving rules drove Tesla higher.

Housing Data and Fed Outlook

In October, US housing starts and building permits declined by 3.1% and 0.6%, respectively, missing estimates. However, a year-on-year rise in housing completions helped offset the gloomy construction outlook.

The housing data had a limited impact as markets remained focused on inflation and employment data for Fed rate decisions. According to the CME FedWatch Tool, the probability of a December Fed rate cut rose from 58.7 on November 18 to 58.9 on November 19.

Expert Views on the Fed Rate Path

Arch Capital Group Chief Economist Parker Ross remarked on inflation and the Fed rate path, stating,

“Fed still on track to cut 25bps in December but pace thereafter will slow if economy remains on current trajectory. Housing Implications: With rates unlikely to move meaningfully lower in the near term, sales likely to remain choppy around historically slow pace.”

Parker Ross added that the odds of a 25bps December rate cut moved closer to 50:50, with only two further rate cuts projected for 2025.

PBoC Disappoints Markets

On Wednesday, November 20, the People’s Bank of China maintained the 1-year and 5-year loan prime rates (LPR) at 3.1% and 3.6%, respectively. The decision disappointed investors hoping for further policy measures to boost demand.

CN Wire remarked on the LPR decision, saying that the PBoC could cut the LPRs further, considering China’s ongoing economic challenges.

Economists Discuss the US Reciprocal Trade Act

Discussions about US tariffs on China remained a focal point. The US Reciprocal Trade Act may impose fresh challenges for companies evading tariffs by shifting production overseas.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on the act, stating,

“One of Trump’s most scary words for countries trading with #China will be the Reciprocal Trade Act. It will start showing that supply chain reshuffling is not enough to avoid US import tariffs. Chinese companies having invested heavily in Vietnam and Mexico but also American companies having moved from China to India, Vietnam, etc, will no longer manage to bypass the tariffs.”

The ongoing threat of US tariffs on Chinese goods remains a headwind for Hong Kong and Mainland China-listed stocks.

Hang Seng Index and Mainland China Equity Markets Struggle Amid Tariff Fears

In Asian markets, the Hang Seng Index edged 0.01% higher on Wednesday morning. Market reaction to the PBoC’s decision to leave the LPRs unchanged and the threat of US tariffs weighed on investor appetite.

Nevertheless, real estate and tech stocks provided support. The Hang Seng Mainland Property Index (HSMPI) and the Hang Seng Tech Index advanced by 0.25% and 0.14%, respectively. Tech giants Baidu (9888) and Tencent saw gains of 0.96% and 0.62%, respectively. Tech stocks advanced as investors awaited NVIDIA (NVDA) earnings results.

However, Mainland China’s equity markets trended lower as the economic outlook remained uncertain. The CSI 300 and the Shanghai Composite declined by 0.34% and 0.14%, respectively.

Nikkei Index Joins Asian Market Pullback

Japan’s Nikkei Index declined 0.50% on Wednesday morning, with trade concerns outweighing upbeat export data. Better-than-expected trade data failed to lift sentiment as shipments to China contributed to a 3.1% year-on-year increase in total exports.

Tariffs targeting China could negatively impact Japan’s trade terms. Concerns about demand from China overshadowed a weaker Japanese Yen, which saw the USD/JPY advance by 0.12% to 154.844.

Softbank Group Corp. (9984 and Tokyo Electron (8035) declined by 0.18% and 1.00%, respectively, while Nissan Motor Corp. (7201) tumbled by 2.38%.

ASX 200 Pulls Back from Tuesday’s All-Time High

In Australia, the ASX 200 Index dropped by 0.37% on Wednesday morning, potentially ending a four-day winning streak. Banking, oil, and tech sectors retreated, countering gains across mining and gold stocks.

Westpac Banking Corp. (WBC) and National Australia Bank (NAB) saw declines of 0.90% and 0.71%, respectively. Expectations for a less dovish Fed rate path affected demand for high-yielding Aussie banking stocks.

The S&P/ ASX All Technology Index was down 0.38%, while Woodside Energy Group Ltd. (WDS) dropped by 0.55%.

Looking Ahead

Investors will closely monitor guidance from the Bank of Japan and the Reserve Bank of Australia, as well as Beijing’s next steps on stimulus. Upcoming economic data releases will be critical for shaping market sentiment.