Signs of Easing in US-China Trade Tensions: Hong Kong's Hang Seng Index Up 1.74%, Tech Stocks Lead the Gains, The Renminbi and Risk Currencies Climb Together
On May 2, 2025, signs of easing in the trade tensions between the US and China prompted a recovery in global financial markets. The Chinese Ministry of Commerce is assessing the US's tariff negotiation proposals, resulting in the Hang Seng Index in Hong Kong rising by 385 points, or 1.74%, led by technology stocks. The offshore yuan appreciated by nearly 500 points against the US dollar, and the Australian and New Zealand dollars strengthened in tandem. The US dollar index fell by 0.2%, reflecting an increase in market risk appetite. Nevertheless, investors remain cautious about the global economic outlook, as recent economic data from both the US and China indicate a slowdown in growth.
Key Updates
05/02 10:02
Signs of Easing in US-China Trade Tensions: Hong Kong's Hang Seng Index Up 1.74%, Tech Stocks Lead the Gains, The Renminbi and Risk Currencies Climb Together
On May 2, 2025, signs of easing in the trade tensions between the US and China prompted a recovery in global financial markets. The Chinese Ministry of Commerce is assessing the US's tariff negotiation proposals, resulting in the Hang Seng Index in Hong Kong rising by 385 points, or 1.74%, led by technology stocks. The offshore yuan appreciated by nearly 500 points against the US dollar, and the Australian and New Zealand dollars strengthened in tandem. The US dollar index fell by 0.2%, reflecting an increase in market risk appetite. Nevertheless, investors remain cautious about the global economic outlook, as recent economic data from both the US and China indicate a slowdown in growth.
US-China Negotiation Signals Emerge, Market Sentiment Warms
Signs of easing in US-China trade tensions became apparent in early May. On May 2, China's Ministry of Commerce responded positively for the first time to the US's tariff negotiation proposal, stating that "China has taken note of the US's repeated high-level statements expressing willingness to negotiate tariffs with China" and emphasized that "an assessment is underway." This statement was interpreted by the market as a positive signal that both sides might resume negotiations.
On the US side, both the US Treasury Secretary and the White House economic advisor welcomed China's recent cancellation of some tariffs on US goods and noted that informal contacts had been made. Meanwhile, China, without public announcement, has compiled a whitelist of US goods exempt from the 125% tariff and removed high tariffs on some US imports, including ethane, pharmaceuticals, and aircraft engines.
Although these measures do not constitute a formal agreement, they have been sufficient to boost market confidence. Bloomberg noted that this is the first sign of substantial communication between the two sides since President Trump announced tariff increases last month.
Hong Kong Stocks Make a Strong Rebound, Tech Stocks Lead
Encouraged by the news of a potential resumption of US-China trade talks, Hong Kong stocks rebounded strongly on May 2. The Hang Seng Index closed at 22,504.68 points, up 385 points, with a rise of 1.74%. The Hang Seng Tech Index performed even more impressively, closing up 3.08% at 5,244 points.
Tech stocks were the main drivers of the day's gains, with Xiaomi rising over 6%, Alibaba nearly 4%, and large tech stocks like Tencent, JD.com, and Meituan generally up 2% to 3%. New energy vehicle stocks also showed strong performance, with Leapmotor rising over 7% due to leading sales among new car companies in April. Pharmaceutical outsourcing concept stocks (CXO), such as WuXi AppTec, also surged over 7% due to impressive earnings.
Despite it being the first trading day after the "May Day" holiday in mainland China, lacking mainland capital "northbound" participation, the Hong Kong stock market turnover still reached HKD 133.728 billion, indicating active market trading.
RMB and Risk Currencies Strengthen, US Dollar Index Falls
Against the backdrop of easing US-China trade tensions, the RMB and various risk currencies strengthened simultaneously. The offshore RMB appreciated nearly 500 points against the US dollar in a single day, breaking through the 7.23 mark, reaching a new high of 7.2519 since March 20, with an increase of about 0.7%.
The Australian and New Zealand dollars, which are closely tied to China's trade, also rose in response. The Australian dollar rose 0.5% to USD 0.6412 during Asian trading hours, and the New Zealand dollar rose 0.4% to USD 0.5932. These two currencies are often seen as proxies for the RMB, and their trends reflect the market's renewed confidence in China's economic and trade prospects.
Conversely, the US dollar index fell 0.2% on the day. Nevertheless, the dollar is still expected to rise for the third consecutive week, reflecting that confidence in US assets has not fully recovered. Singapore currency analyst Alvin Tan noted, "The dollar was heavily hit after the tariff measures were implemented, and now the market is returning to normal."
Market Risk Appetite Increases, But Economic Fundamentals Remain Worrisome
Although market sentiment has warmed, investors remain cautious about the global economic outlook. China's April Manufacturing Purchasing Managers' Index (PMI) fell to 49.0, indicating a contraction in manufacturing activity. China's National Bureau of Statistics pointed out that the rapidly changing external environment is putting pressure on the economy, and the government will focus on "stabilizing employment, enterprises, markets, and expectations."
In the US, the first-quarter Gross Domestic Product (GDP) fell by 0.3%, indicating a slowdown in economic growth momentum. The Trump administration's high-tariff policy has begun to pressure consumer and business spending, and concerns about inflation and economic recession have not been alleviated.
Additionally, the yen, as a safe-haven currency, weakened as risk sentiment rose, falling to 145.17 against the US dollar. The Bank of Japan kept interest rates unchanged and lowered its economic growth forecast, indicating its cautious stance on global trade tensions.
