By 
Singapore — Asian stocks fell sharply on Tuesday as a market sell-off extended on the mounting worry that a wide-ranging trade war could dent US economic growth and lead to a recession, sending skittish investors to the safe-haven Japanese yen.
Investor concerns about the potential economic slowdown were worsened after US President Donald Trump in a Fox News interview talked about a “period of transition” while declining to predict whether his tariffs would result in a US recession.
Those comments and worries sapped risk sentiment, sending stocks sliding and weighing on the US dollar and treasury yields.
In Asia, stocks were battered across the board with Japan’s Nikkei and Taiwan stocks sliding about 3%, hitting their lowest level since September. Australia’s benchmark index was 0.8% lower having touched a seven-month low earlier in the day.
Even Chinese stocks, which have been on a tear this year, were not immune to the downbeat mood. The blue-chip index fell 0.5%, while Hong Kong’s Hang Seng index was 0.8% lower.
Asian markets were taking their cues from Wall Street where the S&P 500 fell 2.7% on Monday, its biggest one-day drop this year, while the Nasdaq slid 4.0%, its biggest single-day percentage drop since September 2022.
The fear of an economic downturn have driven a stock market sell-off that has wiped out $4-trillion from the S&P 500’s peak last month.
S&P and Nasdaq futures cut steep losses from early Asian morning on Tuesday to trade mostly flat ahead of European open. European futures stabilised as well and pointed to a muted start.
Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities, said most traders believed Trump would blink if stocks tanked.
“Markets have now gotten the memo that the administration is intent on ripping the Band-Aid off. Tariffs and recession may be the medicine to create disinflation and getting that 10-year yield lower. For now it’s a controlled demolition.”
The yield on benchmark US 10-year notes fell five basis points (bps) in Asian hours on Tuesday after dropping 10bps in the previous session, the largest daily drop in almost a month.
The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 5bps to a five-month low.
Traders are now pricing in 85bps of easing from the Fed this year, compared to 75bps on Monday, LSEG data showed.
Safe havens were in demand, with the Japanese yen touching a five-month high against the dollar and was last at ¥147.07 to the dollar. The yen is up 7% against the dollar in 2025.
The Swiss franc also strengthened and was hovering near the three-month high touched on Monday. It was last at Sf0.8791 to the dollar on Tuesday.
The dollar index, which measures the US currency against six other units, was huddled near a four-month low. The index has dropped over 4% so far this year.
Unlike Trump’s first term, when signs of cracks in the economy or stock market would have seen a pivot on trade policy, this time around, Trump seems determined to stay the course, said Kyle Rodda, senior financial markets analyst at Capital.com.
“That’s raising these fears about a major growth slowdown, possibly recession, caused by this very aggressive approach to trade. I think investors are coming to the shocking realisation that Trump doesn’t have their back.”
Citi analysts cut their recommendation for US stocks to “neutral” from “overweight”, arguing the US economy may no longer outpace the rest of the world in the coming months.
In commodities, oil prices fell for a second day on Tuesday on worries that US tariffs would slow economies around the world and hurt energy demand while Opec+ ramps up its supply.
Brent futures fell 0.65% to $68.83 a barrel, while US West Texas Intermediate (WTI) crude futures lost 0.82% to $65.49 a barrel.
Gold prices inched higher to $2,895.75/oz, within touching distance of the record high hit last month. Gold is up 10% so far in 2025 after climbing 27% last year.
Reuters
Comments