Hang Seng Index Soars as China Unveils New Policy Support; Nikkei Up on Tariff Relief

US Markets Rally as Trump Flip-Flops on Tariffs

US equity markets posted gains on Wednesday, March 5, as investors reacted to evolving tariff policies and US economic data. The Dow and the S&P 500 gained 1.14% and 1.12%, respectively, while the Nasdaq Composite Index rallied 1.46%.

On March 5, President Trump eased tariff concerns by granting a one-month exemption on auto tariff hikes for Canada and Mexico. Trump also hinted at potential exemptions for other goods, driving demand for risk assets.

US Services PMI and Labor Market Data Send Mixed Signals

While the services sector showed resilience, labor market data pointed to potential economic headwinds ahead of Friday’s Jobs Report.

The US ISM Services PMI increased to 53.5 in February, up from 52.8 in January. Firms increased staffing levels on rising demand. Services sector inflation also accelerated, signaling a robust demand backdrop. Accounting for around 80% of US GDP, the pickup in services sector activity could ease recession risks and dampen bets on a June Fed rate cut.

However, labor market data painted a gloomier picture. ADP reported a modest 77k jobs gain in February, down sharply from 186k in January. A softer labor market could weigh on consumer spending and dampen demand-driven inflation.

Investor sentiment toward tariffs and the US economy set the tone for the Asian session on Thursday, March 6.

Hang Seng Index Rallies on Beijing’s Policy Pledges and 2025 Economic Goals

In Asia, the Hang Seng Index rallied 2.57% on Thursday morning. Beijing’s policy pledges to boost domestic consumption and strengthen the tech sector drove demand for Hong Kong-listed stocks.

CN Wire reported:

“China’s State Council General Office: Tech-finance should strengthen financial support for key national tech projects and technology-based SMEs.”

Tech stocks led the charge, with the Hang Seng Tech Index soaring 4.62%. Tech giants Alibaba (9988) and Baidu (9888) jumped 7.39% and 4.00%, respectively.

Mainland China’s equity markets also saw strong momentum. The CSI 300 and the Shanghai Composite Index advanced by 1.25% and 1.05%, respectively.

Brian Tycangco, editor and analyst at Stansberry Research, commented:

“Significant improvement in Caixin Services PMI along with strong policy support announcements from Beijing to boost consumption drove positive sentiment higher.”

Nikkei Index Advances as Tariff Relief Boosts Sentiment

The Nikkei Index climbed 0.77% on Thursday morning, supported by tariff relief and yen weakness, which boosted export-linked stocks. The USD/JPY pair rose 0.17% to 149.133. Yen weakness could bolster company earnings and valuations.

Notable gainers included Sony Corp. (6758), up 4.55%, while Nissan Motor Corp. (7201) gained 1.69%. Softbank Group (9984) rose 1.89%, tracking the Nasdaq’s gains.

ASX 200 Slides on Banking and Commodities Weakness

Meanwhile, Australia’s ASX 200 Index bucked the broader market trend, falling 0.69% on Thursday morning. Losses across banking and oil-related stocks dragged the Index into the red.

• Financials: Commonwealth Bank of Australia (CBA) and Westpac Banking Corp. (WBC) dropped 1.31% and 0.73%, respectively. Rising 10-year US Treasury yields dampened demand for high-yielding Aussie bank stocks.
• Commodities: Woodside Energy (WDS) plunged 4.93%. Concerns about OPEC+’s plans to boost production and rising inventories pressured crude oil prices.

Outlook: Key Risks and Opportunities

Looking ahead, market sentiment will hinge on tariff developments, US labor market data, China’s National People’s Congress, and central bank guidance.

In Asia, escalating US-China trade tensions may weigh on regional stocks. However, Beijing’s stimulus measures could help offset the economic drag. China’s National People’s Congress will hold a press conference on March 7 to address foreign policy. Beijing’s views on US tariffs and countermeasures will influence risk sentiment.

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