Asian Markets Tumble Amid Fears of US Recession and Trade Tensions
Asian stock markets experienced significant declines on Monday as concerns over aggressive U.S. tariff policies and recession risks rattled investors. With no indication that the White House plans to ease its trade stance, financial markets are increasingly betting on U.S. interest rate cuts as early as May.
Traders now anticipate nearly five rate reductions from the Federal Reserve this year, which has driven U.S. Treasury yields down and weakened the dollar’s strength.
The market volatility intensified after President Donald Trump reiterated his commitment to addressing the U.S. trade deficit, stating that investors must endure the consequences. Meanwhile, China responded by saying the market had already delivered its verdict on their countermeasures.
“The only real lever here is President Trump’s phone, and right now, it doesn’t seem like market turmoil is enough to make him rethink a long-held policy stance,” said Sean Callow, a senior foreign exchange analyst at ITC Markets in Sydney.
Many investors had hoped the rapid market downturn and potential economic damage would push Trump to reconsider, but that hasn’t materialized. Bruce Kasman, chief economist at JPMorgan, warned that persistent U.S. trade actions could derail the current global and domestic economic momentum, raising the probability of a recession to 60%.
Kasman expects the Federal Reserve to start cutting rates in June and possibly continue reductions through January, potentially lowering the upper range of the federal funds rate to 3.0%.
U.S. futures took a hit, with S&P 500 futures dropping 3.1% and Nasdaq futures falling 4.0%. This followed last week’s market wipeout, which erased nearly $6 trillion in value.
The downturn extended to Europe as well. EUROSTOXX 50 futures fell 3.0%, while FTSE and DAX futures declined by 2.7% and 3.5%, respectively.
In Asia, Japan’s Nikkei index dropped 6%, touching levels last seen in 2023, while South Korea’s market fell 5%. The MSCI Asia-Pacific index (excluding Japan) declined 3.6%. Chinese blue-chip stocks plunged 4.4%, as investors waited to see if Beijing would introduce economic stimulus measures. Taiwan’s stock market dropped nearly 10% after reopening from a holiday break, prompting regulators to intervene by restricting short selling.
Oil prices also continued to fall amid the gloomy global economic outlook. Brent crude slid $1.35 to $64.23 per barrel, while U.S. crude dropped $1.395 to $60.60.
Investors moved their money into safer assets, sending 10-year U.S. Treasury yields down by 8 basis points to 3.916%. Futures markets now reflect a stronger likelihood of a Fed rate cut, possibly in May, despite Fed Chair Jerome Powell’s recent comments suggesting patience on rate decisions.
The U.S. dollar weakened further, falling 0.4% against the yen to 146.26, and 0.6% against the Swiss franc. The euro held steady at $1.0961, while the Australian dollar slipped 0.4% amid trade-related pressures.
Despite an expected 0.3% rise in March’s U.S. inflation data, analysts believe inflation will soon spike as new tariffs push prices higher across various consumer goods. This will likely squeeze corporate profit margins, just as Q1 earnings season begins. Big banks are set to kick things off later this week, with the majority of U.S. companies reporting between April 11 and May 9.
Goldman Sachs analysts warned that many firms may skip issuing forward guidance this quarter due to economic uncertainty. They added that rising tariffs could force businesses to either increase prices or accept tighter margins, potentially leading to downward revisions in profit expectations.
Even gold, typically a safe-haven asset, wasn’t spared. Prices dipped 0.3% to $3,026 an ounce, as investors possibly cashed out gains to cover losses elsewhere, raising fears of a broader market selloff.
