Asia Stocks Climb on China Stimulus Hopes, but Trade War and Recession Fears Linger

Asian stock markets saw gains on Monday, buoyed by optimism surrounding China’s latest stimulus measures aimed at boosting domestic consumption. However, ongoing concerns over a potential U.S.-led trade war and slowing global economic growth kept overall gains in check.

Investors also took cues from Wall Street’s rebound on Friday, although this momentum appeared to fade as U.S. stock index futures slipped in Asian trading hours. With key central bank meetings from the Federal Reserve (Fed) and Bank of Japan (BOJ) scheduled this week, traders remained cautious, bracing for potential volatility.

China Stocks Gain on Government’s Economic Push

Chinese equities edged higher after Beijing introduced “comprehensive” measures designed to stimulate consumer demand, including:
✅ Wage increases
✅ Expanded social welfare programs
✅ New subsidy plans

The Shanghai Shenzhen CSI 300 and Shanghai Composite Index both registered slight gains, while Hong Kong’s Hang Seng Index surged 1%, reflecting strong investor interest in Hong Kong-listed stocks.

This optimism was further supported by China’s latest economic data, which revealed:
📌 Industrial production exceeded expectations in the first two months of 2025.
📌 Retail sales growth aligned with forecasts.
📌 Fixed asset investment outpaced projections.
📌 Unemployment rate unexpectedly rose, signaling some underlying economic concerns.

China’s artificial intelligence boom and the potential for further government stimulus have fueled a significant rally in local markets so far in 2025. Investors will closely watch China’s upcoming Loan Prime Rate (LPR) decision later this week for further policy direction.

Japan’s Nikkei Rallies as BOJ Decision Looms

Japan’s Nikkei 225 jumped 1.1%, while the TOPIX Index advanced 1.2%, with markets closely monitoring the BOJ’s monetary policy meeting this week.

While the BOJ is widely expected to keep interest rates steady at its Wednesday meeting, investors will be paying close attention to any indications of future rate hikes. Rising wages, persistent inflation, and steady economic growth have increased speculation that the BOJ could shift towards further tightening later this year.

Broader Asian Markets Ride China’s Momentum

📈 Australia’s ASX 200 climbed 0.6%, though gains were capped after Treasurer Jim Chalmers warned that inflationary pressures and slower economic growth could result from Cyclone Alfred’s impact on the country.

📈 Singapore’s Straits Times Index rose 0.7%, supported by stronger-than-expected month-on-month export growth in February. However, year-on-year export growth fell short of expectations, tempering investor enthusiasm.

📈 South Korea’s KOSPI surged 1.4%, driven by bargain buying in major technology stocks. Yet, political uncertainty surrounding a court ruling on impeached President Yoon Suk Yeol’s attempt to impose martial law in December weighed on overall sentiment. Mass rallies have erupted across the country ahead of this high-stakes decision, which is expected this week.

📈 India’s Nifty 50 futures signaled a slightly positive open, attempting to recover from persistent losses since late 2024. Investors are eyeing India’s wholesale inflation data, set to be released later on Monday.

Trade War Fears Still Cloud Market Sentiment

Despite the gains across Asian markets, concerns over trade tensions between the U.S. and its major trading partners remain a key risk factor. Last week, U.S. President Donald Trump escalated tensions by:
⚠️ Threatening 200% tariffs on European alcoholic beverages in retaliation for the EU’s planned 50% tariff on American whiskey.
⚠️ Enforcing 25% tariffs on imported steel and aluminum, which prompted immediate countermeasures from Canada and the European Union.

With trade relations continuing to fray and global economic uncertainty rising, investors remain wary of further market volatility in the weeks ahead.