Asian stock markets witnessed gains at the opening bell following a turbulent session in the United States, breaking a global selloff fueled by concerns over President Donald Trump’s trade policies potentially hindering economic growth. Early trading saw increases in U.S. equity-index futures.
In Japan and Australia, share prices rose, and futures for the S&P 500 and Nasdaq 100 both increased by over 1%. Meanwhile, Hong Kong’s market was expected to face declines after a U.S.-listed Chinese shares index dropped more than 5% in response to Trump’s threat to impose an additional 50% tariff on China. Treasury yields and the U.S. dollar remained stable early Tuesday.
Fear of an economic downturn resulted in significant fluctuations in U.S. markets, with the S&P 500 index nearly entering a bear market before closing slightly lower on Monday. This came as investors processed new tariff developments. Though Trump indicated potential openness to negotiation, he stated he was not considering halting plans for further tariffs on numerous countries, despite efforts from trading partners to avoid these levies.
Chris Larkin from E*Trade at Morgan Stanley noted that market swings were primarily influenced by news from Washington, citing historical volatility preceding market lows. However, identifying when prices would stabilize remains uncertain.
In the bond market, U.S. Treasuries fell on Monday, retracting part of the largest weekly gain since August. The yield on the 10-year Treasury note rose by 19 basis points as investors liquidated profitable trades to offset equity losses, a trend mirrored by bonds in Australia and New Zealand.
Traders’ predictions regarding the Federal Reserve’s interest rate cuts this year have varied. Current expectations reflect at least three rate reductions in overnight interest-rate swaps, with the first fully incorporated for June. Chinese shares dropped sharply on Monday, and sovereign bond yields approached historic lows as investors prepared for the repercussions of an escalating trade dispute between the United States and China. China’s response to Trump’s comprehensive tariffs has pushed the trade conflict into a new stage.
Additionally, Trump tasked two cabinet members with initiating bilateral trade talks with Japan following a conversation with Prime Minister Shigeru Ishiba. Japan faces a reciprocal tariff of 24% to commence Wednesday, alongside a 25% duty on automobiles.
Amidst the market turbulence, Monday saw U.S. equity buyers encounter several twists and turns. The S&P 500 experienced the most significant intraday bottom-to-top reversal since 2020 when the Covid-19 pandemic disrupted global markets, while the Cboe Volatility Index moved away from the 60-mark threshold earlier in the day.
Some influential figures on Wall Street issued warnings during the market uncertainty. Bill Ackman predicted a “self-induced, economic nuclear winter” for the U.S., Boaz Weinstein suggested that the “avalanche has really just started,” and Jamie Dimon cautioned there could be long-term detrimental effects.
Matt Maley of Miller Tabak indicated that a strong market rebound is expected soon, but the process of adjusting the market to a realistic economic outlook will require time. He advised there would be ample opportunity for aggressive strategies once a clearer indication emerges that the worst of the decline is over.
