Hong Kong stocks soar to three-year high on China optimism
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Hong Kong equities extended their rally on Tuesday, propelling the Hang Seng Index (HSI) to a three-year high, as investor sentiment turned increasingly bullish on China’s economic outlook. The index surged 2.46%, bringing its year-to-date gains to 23%, making it the best-performing major market globally.
The rally was fueled by stronger-than-expected economic data and new stimulus measures from Beijing aimed at bolstering domestic consumption. China's retail sales grew at an accelerated pace in January-February, and authorities announced a "special action plan" to further support spending. This momentum also lifted the Australian dollar (AUD/USD) and New Zealand dollar (NZD/USD), which are heavily tied to Chinese consumer demand.
Investor confidence was further reinforced by speculation that Chinese President Xi Jinping may visit the U.S. in the near future, raising hopes for potential trade negotiations that could ease tensions sparked by Donald Trump's tariff hikes. These tariffs have put pressure on the U.S., Canada, and Mexico, as noted by the OECD, while ironically making China a relative beneficiary as investors seek growth outside the U.S.
The optimism in Asian equities extended to broader markets. Japan’s Nikkei (NI225) gained 1.5%, marking its sharpest rise in three weeks, while South Korea's KOSPI, Australia's ASX 200 (XJO), and Taiwan's TAIEX also posted gains. The notable outlier was Indonesia’s Jakarta Composite Index (COMPOSITE), which plunged nearly 7%, weighed down by tit-for-tat tariff concerns and fiscal uncertainty.
The risk-on sentiment in Asia appears poised to spill into Europe, with EuroStoxx 50 (FESX1!) futures up 0.35% and DAX futures rising 0.43%. European markets are bracing for a historic German vote on debt reforms, which could unleash €500 billion in fiscal stimulus and reshape the region’s economic trajectory.
Despite the rally in equities, global investors remain cautious ahead of the U.S. Federal Reserve’s policy meeting, concluding Wednesday. The U.S. dollar has softened, with EUR/USD trading near $1.09 and GBP/USD just below the key $1.30 level. Gold prices hit a record $3,017 per ounce, reflecting lingering geopolitical risks and expectations of further dollar weakness.
Looking ahead, markets will closely monitor Trump’s upcoming phone call with Vladimir Putin, as Washington seeks a resolution to the Ukraine conflict. Any breakthroughs could impact European gas prices, which have already retreated in recent weeks, and broader risk sentiment in financial markets.
The rally was fueled by stronger-than-expected economic data and new stimulus measures from Beijing aimed at bolstering domestic consumption. China's retail sales grew at an accelerated pace in January-February, and authorities announced a "special action plan" to further support spending. This momentum also lifted the Australian dollar (AUD/USD) and New Zealand dollar (NZD/USD), which are heavily tied to Chinese consumer demand.
Investor confidence was further reinforced by speculation that Chinese President Xi Jinping may visit the U.S. in the near future, raising hopes for potential trade negotiations that could ease tensions sparked by Donald Trump's tariff hikes. These tariffs have put pressure on the U.S., Canada, and Mexico, as noted by the OECD, while ironically making China a relative beneficiary as investors seek growth outside the U.S.
The optimism in Asian equities extended to broader markets. Japan’s Nikkei (NI225) gained 1.5%, marking its sharpest rise in three weeks, while South Korea's KOSPI, Australia's ASX 200 (XJO), and Taiwan's TAIEX also posted gains. The notable outlier was Indonesia’s Jakarta Composite Index (COMPOSITE), which plunged nearly 7%, weighed down by tit-for-tat tariff concerns and fiscal uncertainty.
The risk-on sentiment in Asia appears poised to spill into Europe, with EuroStoxx 50 (FESX1!) futures up 0.35% and DAX futures rising 0.43%. European markets are bracing for a historic German vote on debt reforms, which could unleash €500 billion in fiscal stimulus and reshape the region’s economic trajectory.
Despite the rally in equities, global investors remain cautious ahead of the U.S. Federal Reserve’s policy meeting, concluding Wednesday. The U.S. dollar has softened, with EUR/USD trading near $1.09 and GBP/USD just below the key $1.30 level. Gold prices hit a record $3,017 per ounce, reflecting lingering geopolitical risks and expectations of further dollar weakness.
Looking ahead, markets will closely monitor Trump’s upcoming phone call with Vladimir Putin, as Washington seeks a resolution to the Ukraine conflict. Any breakthroughs could impact European gas prices, which have already retreated in recent weeks, and broader risk sentiment in financial markets.