Market navigator: week of 12 May 2025

What happened last week

• Trade negotiations advance: US established its first country-level trade framework US with UK, reducing US duties on British automotive, steel and aluminium sectors, while British tariffs on US goods will decrease from 5.1% to 1.8%. Markets responded positively on anticipation of additional trade agreements, with US-China discussions commencing in Switzerland on 10 May.
• Central bank policy decisions: Fed funds rates remained unchanged at 4.25-4.5% despite political pressure from President Trump. Chair Powell indicated the US economy remains robust but cautioned that sustained tariffs could accelerate inflation and increase unemployment. The Bank of England implemented a 25 basis point (bp) rate reduction, though the non-unanimous decision prompted traders to recalibrate expectations for a potential June cut.
• Asian currency fluctuations: The Taiwan dollar appreciated 8% against USD across two sessions, reaching a three-year high amid speculation that currency appreciation is necessary to secure a US trade agreement. The Hong Kong Monetary Authority intervened by selling over HK$100 billion to maintain its USD peg ahead of CATL's IPO. The People's Bank of China (PBOC) also intervened as USD/CNH declined to a six-month low. Most gains subsequently reversed on trade optimism.
• China's monetary easing: The PBOC reduced policy rates from 1.5% to 1.4% and decreased the reserve requirement ratio (RRR) by 50 bp, introducing 1 trillion yuan of liquidity. Additional measures include reductions in mortgage rates and targeted lending facilities to technology enterprises.

Markets in focus

US markets navigate trade policy shifts and tech sector developments

Major US equity indices concluded last week with minimal variation following several mixed trading sessions. Regarding trade policies, negative headlines concerning potential tariffs on non-US produced films and pharmaceutical products were counterbalanced by positive developments in negotiations with the UK and China. The Trump administration is also considering revising the framework for artificial intelligence technology restrictions, potentially allowing numerous countries beyond China to negotiate access to advanced semiconductor components.

Company-specific developments also contributed to divergent stock performance last week. Share prices of Apple and Alphabet declined 3% and 7% respectively after Apple revealed plans to transform the Safari browser to incorporate an AI-powered search engine, potentially terminating a longstanding partnership with Google. Conversely, Tesla's share price appreciated 4%, bolstered by easing trade tension headlines. Other Magnificent Seven stocks traded within a narrow range.

The US Tech 100 Index has reached a critical technical juncture as it approaches the 200-day simple moving average (SMA) at 20,478 following breakthroughs of both the 20-day and 50-day SMA. Price action exhibits characteristics consistent with Elliott Wave structures, with the current advance potentially representing a corrective Wave B formation, which may subsequently yield to a bearish move towards 16,000. Should the index maintain levels above its 200-day SMA, the corrective phase would likely be completed, potentially enabling the index to challenge its February peak at 22,223.

Figure 1: US Tech 100 index (daily) price chart

Hang Seng gains amid Chinese monetary stimulus

The Hang Seng Index (HSI) continued its upward trajectory, extending its winning streak to seven consecutive trading sessions since 29 April; month-to-date, the benchmark has appreciated 3%.

This positive market momentum is primarily attributable to two key catalysts. Firstly, the PBOC has announced a series of accommodative monetary measures. Beyond the RRR and reverse repo rate reductions, the central bank has introduced specialised lending facilities to support technology firms, elderly care initiatives, agricultural enterprises and the residential property market. Secondly, US and Chinese officials are convening in Switzerland over the weekend for trade negotiations, marking the first formal discussions since the Trump administration elevated tariffs to as high as 145% on Chinese imports.

The probability of reaching a comprehensive agreement during the initial round of discussions remains low. Consequently, investors should maintain a cautious approach and prepare for potential market volatility in the coming week. Market participants will also closely monitor upcoming earnings reports from Tencent and Alibaba, which have historically served as key indicators of Chinese economic health.

Technical analysis continues to indicate a medium-term bullish trend for the HSI. However, after successfully breaching the 50-day SMA, momentum has moderated and the index has entered a consolidation phase as markets await greater clarity from US-China trade negotiations. Constructive progress could propel the index towards the psychologically significant 24,000 threshold. Conversely, should the weekend discussions yield limited substantive outcomes, the index may conform to Wave C trajectory within the Elliott Wave framework and potentially retrace towards 19,000.

Figure 2: Hang Seng index (daily) price chart

Bitcoin surpasses $100,000 threshold

Bitcoin has demonstrated remarkable recovery, rebounding nearly 40% from April lows, and exceeding $100,000 for the first time since February. The cryptocurrency surpassed this psychologically significant milestone following the US-UK trade framework announcement last Thursday. Risk appetite has noticeably strengthened over the past fortnight as optimism regarding trade agreements has emerged. Any positive developments from the US-China discussions in Switzerland this weekend could further catalyse price appreciation.

Robust month-to-date net inflows of US$2 billion through exchange-traded funds (ETF), alongside accumulation by Bitcoin whales, have contributed significantly to the price advancement. Market observers have also noted substantial short-covering pressure at the $98,000 level.

Technical analysis suggests that the corrective phase has likely concluded, with a new bullish trend commencing. In the near term, Bitcoin may experience a technical correction with support anticipated around $91,400, given elevated valuations and excessively bullish market sentiment. The relative strength index (RSI) has surpassed the 70 threshold, while the Crypto Fear and Greed Index approaches "extreme greed" territory, indicating overbought conditions. A 100% Fibonacci extension of the uptrend between September and December 2024 suggests the cryptocurrency could potentially advance towards $130,000 over the medium term if it breaks through the historical high and resistance level at $109,576.

Figure 3: Bitcoin (daily) price chart

The week ahead

The upcoming week features crucial US economic data with metrics - Consumer Price Index (CPI) and Producer Price Index (PPI) - likely to provide valuable insights into the Federal Reserve's next policy moves. Consumer sentiment readings will whether household spending intentions have improved as trade tensions moderate. On the corporate earnings front, major Chinese technology enterprises including Alibaba, Tencent, and JD.com are scheduled to report results, potentially offering important signals regarding China's digital economy and consumer trends amid persistent deflationary pressures.

US consumer sentiment has declined for four consecutive months, reaching 52.2. One-year inflation expectations have surged to 6.5%, the highest level since 1981, fuelled by recession concerns and anticipated price increases resulting from the Trump's tariff policies. As the government advances trade negotiations, market participants will monitor upcoming data releases closely for indications of recovering consumer confidence, which could potentially propel risk assets back towards pre-'Liberation Day' peak levels.

Figure 4: University of Michigan survey results

Key macro events this week

Tuesday 13 May 2025

• 8.30am (HK time) – Australia Westpac Consumer Confidence Change (May): previous -6
• 9.30am (HK time) – Australia NAB Business Confidence (April): previous -3
• 2.00pm (HK time) – UK Unemployment Rate (March): previous 4.4%, consensus 4.5%
• 8.30pm (HK time) – US Core Inflation Rate month-on-month (MoM) (April): previous 0.4%, consensus 0.3%
• 8.30pm (HK time) – US Core Inflation Rate year-on-year (YoY) (April): previous 2.8%
• 8.30pm (HK time) – US Inflation Rate MoM (April): previous -0.1%, consensus 0.3%
• 8.30pm (HK time) – US Inflation Rate YoY (April): previous 2.4%, consensus 2.4%

Thursday 15 May 2025

• 9.30am (HK time) – Australia Unemployment Rate: previous 4.1%, consensus 4.1%
• 2.00pm (HK time) – UK GDP Growth Rate QoQ Prel (Q1): previous 0.1%, consensus 0.6%
• 2.00pm (HK time) – UK GDP Growth Rate YoY Prel (Q1): previous 1.5%
• 2.00pm (HK time) – UK GDP MoM (March): previous 0.5%, consensus 0.1%
• 8.30pm (HK time) – US PPI MoM (April): previous -0.4%, consensus 0.2%
• 8.30pm (HK time) – US Retail Sales MoM (April): previous 1.4%, consensus 0.1%

Friday 16 May 2025

• 7.50am (HK time) – Japan GDP Growth Rate QoQ Prel (Q1): previous 0.6%, consensus -0.1%
• 8.30pm (HK time) – US Building Permits Prel (April): previous 1.467M, consensus 1.45M
• 8.30pm (HK time) – US Housing Starts (April): previous 1.324M, consensus 1.36M
• 10.00pm (HK time) – US Michigan Consumer Sentiment Prel (May): previous 52.2, consensus 53

Key corporate earnings

Tuesday 13 May 2025

• JD.com

Wednesday 14 May 2025

• Tencent
• Cisco Systems

Thursday 15 May 2025

• Alibaba
• NetEase
• Deere 
• Walmart 
• Applied Materials

Source: Trading Economics, AASTOCKS, Reuters (as of 11 May 2025)