Market navigator: week of 31 March 2025

Written by

Fabien Yip

Market Analyst

Summary

• What Happened Last Week: Global markets reacted to escalating trade tensions with new 25% US auto tariffs, while Hong Kong's earnings season concluded with mixed results. Meanwhile, stagflation concerns grow in US, and commodity markets experienced significant price surges in oil, copper, and precious metals.
• Markets in Focus: Nasdaq 100 faces imminent test of 19,104 support with vulnerability to 18,400 if breached. HSI requires a break above 24,000 for upward momentum, while USD/JPY appears set to resume its downtrend after encountering resistance.
• The Week Ahead: Reciprocal tariffs to go live this week. Focus shifts to China PMI data, the RBA's rate decision (expected unchanged), and US employment figures, with moderated job creation anticipated in the March non-farm payrolls report.

What happened last week

• Tariff tensions resurface: Markets fluctuated dramatically initially showing optimism about limited reciprocal tariffs scheduled for 2 April, before plunging on news of a 25% tariff on all auto imports and threats against the European Union (EU) and Canada should they coordinate against US trade policies.
• Hong Kong earnings season concludes: Key Hong Kong-listed companies reported year-end results with BYD profits exceeding $100 billion, surpassing Tesla. Largest refiner Sinopec saw profits fall 16% amid weak demand, while toy maker Pop Mart doubled both sales and profits.
• Stagflation concerns emerge: Deteriorating US consumer sentiment alongside rising core personal consumption expenditures (PCE) fuelled stagflation fears. Federal Reserve (Fed) members suggested interest rates may remain elevated longer to counteract tariff-induced inflation pressures.
• Commodity market volatility: Supply constraints pushed WTI crude toward $70 per barrel, while New York copper hit a record $5.374 per pound as buyers stockpiled ahead of tariffs. Gold reached an unprecedented $3,086 amid trade concerns, and silver surged 3% on short covering.

Markets in Focus

US stock market downtrend gathers momentum

Despite experiencing a temporary reprieve in early trading sessions last week, major US indices reversed course decisively on Wednesday following President Trump's announcement of additional automotive sector tariffs. Market sentiment deteriorated further on Friday in response to disappointing consumer confidence metrics and persistent inflationary pressures.

The University of Michigan consumer survey revealed sentiment has fallen to its lowest level since late 2022, while long-term inflation expectations for the next five to 10 years have escalated to 4.1%, up from 3.5% in February's assessment. Regardless of whether these elevated inflation expectations ultimately materialise, they clearly reflect substantial public anxiety regarding the economic outlook.

The PCE data reinforced this concerning trajectory, with the core measure (excluding volatile food and energy components) increasing by 0.4% -- representing the most rapid monthly expansion since January 2024 -- while inflation-adjusted consumer expenditure recorded minimal growth of just 0.1%.

Figure 1: S&P 500 composite and sector indices performance (%)

Technical analysis indicates that the US Tech 100 Index has re-established its bearish trajectory after forming a lower high during Wednesday's session. The index appears poised to challenge its recent low of 19,104, with further downside potential toward the 18,400 level should current support fail to hold. A technical rebound may materialise if the relative strength index (RSI) penetrates below the 30 threshold, though any recovery would likely encounter significant resistance at the recent peak of 20,340. A sustainable reversal of the prevailing downtrend appears improbable in the medium term without a decisive break and consolidation above the 200-day simple moving average.

Figure 2: IG US Tech 100 index (daily) price chart

Hang Seng Index awaits fresh catalysts

The Hang Seng Index (HSI) recorded its third consecutive weekly decline. Contributing factors include underperformance in the technology sector, Xiaomi's heavily discounted HK$42.5 billion share sale and intensifying trade friction, particularly affecting the automotive industry. Despite several major corporations reporting satisfactory financial performance for 2024, market participants appear to be seeking more compelling positive developments. The Hang Seng Tech Index has officially entered correction territory after retracing 11% from its three-year peak established on 7 March.

Examining the price action, HSI oscillated around its 20-day moving average last week. Following three successive weeks of depreciation, a technical recovery appears feasible, provided no additional adverse headlines emerge. We maintain our view that a conclusive breakthrough above the psychologically significant 24,000 barrier is essential to initiate the next phase of upward momentum towards the January 2022 high of 25,050. Support levels continue to hold at 22,550, with the 50-day moving average at 22,372 offering an additional cushion against further declines.

Figure 3: Hang Seng Index (daily) price chart

Japanese yen appreciates amid inflation surprise

USD/JPY climbed to 151.21 last Friday, marking its highest level since 3 March, as market participants evaluated the potential ramifications of Trump's tariff policies on Japanese exports, with automobile manufacturers expected to bear significant consequences. However, the pair rapidly retreated to 149.68 following Tokyo consumer price index (CPI) data that revealed inflation accelerating at a pace exceeding market forecasts. While the Bank of Japan (BoJ) maintained its policy rate during the March meeting, the summary of opinions from the session indicated BoJ's willingness to further increase rates should inflationary pressures persist alongside stable economic growth. The prevailing risk-averse market sentiment represents an additional factor bolstering the traditionally defensive yen.

From a technical perspective, the currency pair is encountering resistance following its three-week recovery phase. We anticipate a resumption of the downtrend provided USD/JPY fails to breach the critical 200-day moving average situated at 151.62. Our conviction regarding the continuation of the downtrend would strengthen further if the pair penetrates the immediate support zone between 148.2 and 148.6, potentially targeting the recent low of 146.54.

Figure 4: USD/JPY (daily) price chart

The Week Ahead

With President Trump's reciprocal tariffs scheduled for implementation on 2 April, market focus will intensify around trade policy developments. Other economic releases this week include China's purchasing managers' index (PMI) for March, the Reserve Bank of Australia's (RBA) interest rate decision, and US employment indicators, most notably the non-farm payrolls report.

Despite cooling labour markets and moderating inflation, the RBA expressed caution about additional easing during their February meeting, citing geopolitical and trade policy uncertainties. We expect rates to remain unchanged at their 1 April meeting as the bank assesses the impact of current policy on labour markets and consumption. Market participants will scrutinise the statement for future rate guidance -- a hawkish tone could strengthen the Australian dollar (AUD). Markets currently price in a 25 basis point (bp) cut in July with another in October.

Figure 5: ASX 30 Day Interbank Cash Rate Futures Implied Yield Curve

Last week's initial jobless claims in the US decreased marginally by 1,000 to 224,000, slightly below consensus forecasts. Recent labour market indicators continue to demonstrate resilience despite economic deceleration following an extended period of restrictive monetary policy. Market participants anticipate more modest employment gains in March, partly attributable to federal workforce reductions implemented under the Department of Government Efficiency (DOGE) initiative.

Key macro events this week

Monday 31 March 2025

• 7:50 am (HK time) -- Japan Industrial Production MoM Preliminary (February): previous -1.1%, consensus 2.3%
• 7:50 am (HK time) -- Japan Retail Sales YoY (February): previous 3.9%, consensus 2.0%
• 9:30am (HK time) -- China National Bureau of Statistics Manufacturing PMI (March): previous 50.2, consensus 50.5
• 8:00pm (HK time) -- Germany Inflation Rate YoY Preliminary (March): previous 2.3%

Tuesday 1 April 2025

• 7:50am (HK time) -- Japan Tankan Large Manufacturers Index (Q1): previous 14, consensus 12
• 9:45am (HK time) -- China Caixin Manufacturing PMI (March): previous 50.8, consensus 51.2
• 12:30pm (HK time) -- Australia RBA Interest Rate Decision: expect to hold rates
• 5:00pm (HK time) -- Euro Area Inflation Rate YoY Flash (March): previous 2.3%, consensus 2.2%
• 5:00pm (HK time) -- Euro unemployment rate (February): previous 6.2%, forecast 6.3%
• 10:00pm (HK time) -- US ISM Manufacturing PMI (March): previous 50.3, market consensus 50.3
• 10:00pm (HK time) -- US JOLTs Job Openings (February): previous 7.74 million, consensus 7.68 million

Wednesday 2 April 2025

• 8:15pm (HK time) -- US ADP employment change (March): previous 77K, consensus 120K

Thursday 3 April 2025

• 8:30am (HK time) -- Australia Balance of Trade (February): previous A$5.62 billion, consensus A$5.60 billion
• 9:45am (HK time) -- China Caixin services PMI (March): previous 51.4, consensus 51.6
• 10:00pm (HK time) -- US ISM Services PMI (March): previous 53.5, consensus 53

Friday 4 April 2025

• 8:30pm (HK time) -- US Non-Farm Payrolls (March): previous 151K, consensus 128K
• 8:30pm (HK time) -- US Unemployment Rate (March): previous 4.1%, consensus 4.2%
• 11:25pm (HK time) -- Fed chair Powell speech

Key corporate earnings

Monday 31 March 2025

• China Overseas
• Agile Group

Source: Trading Economics, AASTOCKS (as of 29 March 2025, based on HK time zone)