Hang Seng Index and Nikkei 225: Markets React to US-China Tariff Truce

Markets Soar as US and China Hit Tariff Pause

Wall Street surged on news of the US and China agreeing to temporarily cut tariffs to pursue a lasting trade agreement. The Nasdaq Composite Index surged 4.35%, while the Dow and the S&P 500 rallied 2.81% and 3.26%, respectively.

On Monday, May 12, the US and China announced an agreement to lower tariffs for 90 days. Levies on US goods would drop from 125% to 10%, while tariffs on Chinese goods would fall from 145% to 30%.

US President Trump hailed the agreement as a ‘total trade reset.’ Notably, the tariff relief eased US recession concerns, lifting demand for risk assets. According to Polymarket, recession odds for 2025 fell from 66% to 40% on May 12, the lowest since April 1, a day before Liberation Day (April 2 tariffs).

Hang Seng and Mainland China Markets Diverge Post Trade Deal

On Tuesday, May 13, Asian equity markets posted mixed performances after Monday’s trade news. The Hang Seng Index slid 1.49% as tech stocks suffered heavy losses.

• The Hang Seng Tech Index plunged 2.90% while the Hang Seng Mainland Properties Index slipped 0.31%.
• Tech giant Alibaba (09988) slid 3.05%, while Baidu (09888) and JD.com (09618) fell 1.01% and 1.57%, respectively.
• Auto stocks also stumbled, with Li Auto (02015.HK) and BYD Electronic International (00285.HK) plunging 3.23% and 6.19%, respectively.

Brian Tyncangco, editor at Stansberry Research, underscored sentiment toward Hong Kong and Mainland China-listed stocks, stating:

“We have a pause, we don’t have a deal. We have a pause. Strategic decoupling is still on the table. Don’t get too greedy.”

On May 13, JD.com and Tencent Music Entertainment are among the big names releasing corporate earnings in a busy week for the Hong Kong earnings calendar. Tencent Holdings, Alibaba, and NetEase will also influence market sentiment with earnings reports this week. Tuesday’s pullback likely stemmed from profit-taking ahead of key earnings.

Meanwhile, Mainland benchmarks moved higher, with the CSI 300 and Shanghai Composite rising 0.14% and 0.19%, respectively.

Nikkei 225 Rallies as Yen Stumbles

Japan’s Nikkei 225 climbed 1.80% on Tuesday morning as the US-China trade agreement sank demand for safe-haven assets, such as the Yen. The USD/JPY pair surged 2.13% on news of the tariff cuts, closing the May 12 session at 148.452, its highest since Liberation Day. A weaker Japanese Yen could offset the effects of tariffs by boosting the competitiveness of Japanese exports.

Nissan Motor (7201) and Sony Corp. (6758) rallied 3.09% and 1.31%, respectively. Meanwhile, tech stocks Softbank Group (9984) and Tokyo Electron (8035) advanced 1.59% and 4.94%, respectively.

ASX 200 Tracks Wall Street Higher

Australia’s ASX 200 rose 0.40% on Tuesday morning. Mining, oil, and tech stocks rallied on the tariff news, while gold tumbled.

BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) jumped 2.71% and 2.44%, respectively, as iron ore spot prices rose 3.20% in response to lower tariffs, and an improving demand outlook. Woodside Energy (WDS) surged 4.21% on improving demand sentiment, while the S&P/ASX All Tech Index rose 2.91%, tracking the Nasdaq’s gains.

Meanwhile, ‘risk-on’ sentiment weighed on gold prices. Prices fell 2.74% on May 12, sending Northern Star Resources (NST) down 4.85% on May 13.

Outlook: Focus on Trade Talks and Beijing Stimulus

Markets will closely monitor the US-China trade-related headlines. A re-escalation could impact risk sentiment and boost safe-haven demand. Meanwhile, investors should also monitor stimulus-related news from Beijing, especially with a zero-tariff deal appearing unlikely. Fresh stimulus pledges could offset tariff uncertainties, supporting demand for Hong Kong and Mainland China-listed stocks.

Traders should remain alert and responsive to headlines on trade and central bank responses.

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