Yesterday, U.S. stock futures continued their bearish momentum, extending the sell-off. During today's Asian trading session, S&P 500 futures edged up by just 0.1%, while the tech-heavy NASDAQ added 0.2%.At the end of yesterday's regular session, stock indices staged a brief relief rally following remarks from U.S. Commerce Secretary Howard Lutnick, who suggested that the Trump administration might lift some tariffs. However, the gains quickly evaporated, leaving markets vulnerable once again.

Hong Kong Stocks Lead Gains as China Sets Growth Target

Hong Kong stocks led today's rally as China's GDP target fueled expectations for increased economic stimulus. According to reports from the National People's Congress in Beijing, China has maintained its growth target at around 5% for 2025—marking the third consecutive year with the same goal. Given rising global uncertainty surrounding tariffs and geopolitical risks, economists now anticipate stronger policy support from Chinese officials.

Additionally, China has widened its budget deficit to the highest level in 30 years as it battles deflation, a collapsing real estate market, and now an escalating trade war with the U.S.. Policymakers also lowered their inflation target to 2%, down from the long-standing 3% benchmark. Following these announcements, the yuan weakened slightly.

Trade War Uncertainty and Trump's Stance on Tariffs

In his State of the Union address, Trump acknowledged that a transition period for tariffs might be necessary, defending his economic restructuring policies. He also called for an end to the $52 billion semiconductor subsidy program, while once again emphasizing the importance of 25% tariffs on aluminum, copper, and steel. His speech coincided with new data showing a slowdown in economic activity, attributed to uncertainty stemming from the global trade war.

The situation is further complicated by Trump's erratic trade policy—one day imposing tariffs, the next day hinting at their removal, and then threatening new trade wars soon after.

Yesterday, Lutnick's comments suggesting a potential tariff compromise with Canada and Mexico, along with Germany's plan to boost defense spending, temporarily lifted market sentiment. However, the euphoria was short-lived. U.S. Treasury yields declined on Tuesday, while the dollar continued to weaken against all G10 currencies.

Later today, the U.S. is expected to announce a plan for potential tariff exemptions on Mexican and Canadian goods covered by the North American Free Trade Agreement (NAFTA).

Germany's Shift on Defense Spending Fuels Risk Appetite

Germany announced plans to unlock hundreds of billions of euros for defense and infrastructure investments, marking a dramatic policy shift that abandons its long-standing commitment to fiscal restraint. This move boosted demand for risk assets, driving a recovery in global currency markets.

Commodities and Cryptocurrencies: Oil Falls, Gold Stabilizes

In commodities, oil extended its decline, while gold stabilized near record highs. Meanwhile, Bitcoin fluctuated between gains and losses, struggling to find direction.

Technical Outlook for S&P 500

The downtrend remains intact for the S&P 500. Today, buyers must push past the nearest resistance at $5833 to sustain a rebound. A breakout above this level could trigger further gains toward $5854. Another key level to watch is $5877, as controlling this zone would strengthen bullish positions.

If risk appetite weakens and sellers regain control, buyers must defend support at $5813. A break below this level could drive the index down to $5791, opening the door for a further decline toward $5766.