THIS week will be a crucial indicator of whether the bear market in Hong Kong stocks is over. Traders will arrive at their desks tomorrow morning having considered the impact of a possible trade war between the United States and China. Reaction to the news will determine the market's near-term direction. Friday's 136-point bounce in the Hang Seng Index after US interest rates were raised 0.5 per cent confirmed market expectations and removed much of the recent uncertainty. Analysts said a more positive sentiment was in evidence due to the growing feeling that last week's rate increase could be one of the last. But fears of further house price falls will continue to hold share prices back. The market could rally 200 to 300 points this week but then run out of steam as a lot of bad news was already discounted into share prices, said Howard Gorges, the managing director of South China Securities. Apart from a costly Sino-US trade war, the main hurdle to a resumption in market confidence was firm evidence of US economic growth slowing, he said. The significance of higher interest rates will be determined by the way Hong Kong people react to the rise. Reduced spending and further house price falls would only push share prices lower, said Peregrine Brokerage director Chris Malpass.