(Bloomberg) — Asian stocks pulled back after a five-day rally that pushed a regional gauge into overbought territory, as investors turned cautious amid increasing trade tensions and geopolitical uncertainty. Hong Kong technology stocks were an outlier.
The MSCI Asia Pacific Index dropped as much as 0.6% with stocks in Hong Kong and Japan declining after President Donald Trump threatened to more impose tariffs of around 25%. Semiconductor shares advanced in China while equity index futures for Europe pointed to a lower open.
While investors remain cautious on the tariff front and talks to end the war in Ukraine, much of the focus in Asia is on whether a $1 trillion rally in Chinese stocks will be sustained. Advances in artificial intelligence by DeepSeek and President Xi Jinping’s meeting with tech companies, including Alibaba Group co-founder Jack Ma, have encouraged investors.
“There’s good reason to be bullish on Chinese and Hong Kong stocks, especially given signals from the central government of a more pro-tech industry and private enterprise stance,” said Kyle Rodda, a senior analyst at Capital.com in Melbourne. “The question is whether the ‘Jack’s Back’ trade still has momentum, or whether the market is due a pull back.”
Chinese mainland investors bought HK$22.4 billion ($2.9 billion) of the city’s stocks on Tuesday. The inflow Tuesday from mainland China to Hong Kong was the biggest daily purchase since early 2021 and the fourth largest on record, according to Bloomberg-compiled data going back to late 2016, when trading links with the financial hub began.
“Against the positive short-term impact in China, there is still medium-term uncertainty around Trump tariff threats and interest rates path,” said Kieran Calder, head of Asia equity research at Union Bancaire Privee in Singapore.
Shares in Baidu Inc. declined as much as 7.3% in Hong Kong after the company announced a drop in revenue. The weakness in internet companies came after Baidu’s forecast raised concerns about capital expenditure, said Ken Wong, an Asian equity portfolio specialist at Eastspring Investments.
Investors are concerned “that Chinese internet companies are not seeing the growth prospects this year and hence not raising CAPEX,” he said.
In corporate news, HSBC Holdings Plc said it expects $1.8 billion in costs over the next two years as it embarks on a global restructuring program that has seen the lender shutter some of its businesses and slash management ranks. National Australia Bank Ltd.’s shares slid as much as 8.6% after first quarter earnings declined.
On tariffs, Trump’s announcement of new duties are expected to come as soon as April 2. His previously announced 25% tariffs on steel and aluminum are set to come in March. Tuesday’s comments are his most detailed yet in specifying other sectors that would be hit with fresh barriers.
“I probably will tell you that on April 2, but it’ll be in the neighborhood of 25%,” Trump told reporters Tuesday at his Mar-a-Lago club when asked about auto tariffs. On the drug imports, he said: “It’ll be 25% and higher, and it’ll go very substantially higher over a course of a year.”
Shares of Toyota Motor Corp. and Honda Motor Co. declined after Trump’s comments.
Japan’s exports rose at a faster clip. The yen strengthened after a drop in the previous session.
On the geopolitical front, officials from the US and Russia met for a first round of talks over the war in Ukraine and raised the possibility of broader cooperation. Secretary of State Marco Rubio told European allies that the US will keep sanctions on Russia in place at least until a deal to end the Ukraine conflict is reached.
In the US, Federal Reserve Bank of San Francisco President Mary Daly said policy needs to remain restrictive until there’s more progress on inflation, which she expects will continue declining over time.
In other markets, oil held advances on the possible postponement of OPEC+ supply increases and uncertainty around flows from Russia. Gold fluctuated and traded close to a new record high.
Key events this week:
- Fed minutes, Wednesday
- China loan prime rates, Thursday
- Eurozone consumer confidence, Thursday
- US initial jobless claims, Philadelphia Fed manufacturing index, Thursday
- Fed’s Austan Goolsbee and Alberto Musalem speak, Thursday
- Eurozone HCOB manufacturing & services PMI, Friday
- US S&P Global manufacturing & services PMI, existing home sales, consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 1:19 p.m. Tokyo time
- Nikkei 225 futures (OSE) fell 0.5%
- Japan’s Topix fell 0.4%
- Australia’s S&P/ASX 200 fell 0.8%
- Hong Kong’s Hang Seng fell 0.3%
- The Shanghai Composite rose 0.5%
- Euro Stoxx 50 futures fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0450
- The Japanese yen rose 0.1% to 151.89 per dollar
- The offshore yuan fell 0.1% to 7.2840 per dollar
Cryptocurrencies
- Bitcoin rose 0.6% to $95,596.17
- Ether rose 1.2% to $2,682.26
Bonds
- The yield on 10-year Treasuries was little changed at 4.55%
- Australia’s 10-year yield advanced one basis point to 4.52%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold fell 0.3% to $2,928.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
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