NEW YORK: A flight from global equities accelerated Monday (April 7) and investors piled into haven assets as the fallout from US President Donald Trump’s tariffs deepened after China announced retaliatory measures.
Contracts for the S&P 500 and the Nasdaq 100 fell more than four per cent each after the indexes slumped Friday. From Sydney to Tokyo, Asian stocks plunged at the open along with commodities such as oil and copper. Yields on two-year Treasuries, the most policy sensitive bonds, dropped as much as 22 basis points while the Japanese yen and Swiss franc surged.
Chinese stocks are bracing for a grim day when trading resumes after an extended weekend, during which Beijing announced 34 per cent tariffs on all imports from the US. A gauge of US-listed Chinese shares fell 8.9 per cent on Friday.
The moves underscore the heightened concerns across financial markets as Trump attempts to reshape the global trade in Washington’s favour, increasing the risk of a recession. Federal Reserve Chair Jerome Powell made clear that the central bank won’t rush to react to the tariffs, which are likely to have a significant effect on the US economy, including slower growth and higher inflation.
"We expect the market fallout from the tariffs to continue this week,” said Win Thin of Brown Brothers Harriman. Trump administration officials have signaled that no policy changes are planned to address the market selloff, he said. "Given this message, equity markets are likely to continue selling off and Treasuries are likely to continue rallying.”
There were some signs the selloff were beginning to disrupt normal market operations. Japan experienced a so-called circuit-breaker given the magnitude of the losses there, while South Korea briefly halted sell orders for programme trading.
The president’s top economic officials dismissed investors’ fears of inflation and recession, offering no apologies for the market turmoil sparked by sweeping global tariffs and defiantly insisting a boom is on the horizon. Trump said he isn’t intentionally engineering a market selloff and he cannot say what happens to the markets.
A rally in US government debt sent the US two-year yield to touch the lowest since 2022 last week. Those gains could accelerate as traders price in a greater chance the Fed moves more aggressively to cut interest rates to keep the economy from stalling. Australian and New Zealand yields fell in opening trade.
Trump’s tariffs, which come into effect April 9, have already impacted the operations of global businesses. Companies are already working out new plans to cope with the tariffs. Jaguar Land Rover is pausing shipments of its cars to the US while Mercedes Benz Group AG is considering shifting the production of another vehicle model to the US.
In addition to imposing new tariffs in response to Trump’s latest levies, China over the weekend pledged decisive action to defend its economy. These include "resolute measures” to safeguard its sovereignty, security and other interests, the state-owned Xinhua News Agency reported on Saturday.
"Traders are nervously watching the two biggest economies going toe to toe on tariffs and are fearing that both could receive knockout blows from a prolonged economic fight,” wrote Tim Waterer, chief market analyst at KCM Trade in Sydney. "Neither the US nor China are backing down when it comes to slapping new tariffs on each other and in this escalatory environment it’s not surprising to see that risk assets are being avoided like the plague.”
Malaysia will lead efforts to coordinate a regional response in South-East Asia toward US tariffs, the country’s Prime Minister Anwar Ibrahim said. India, meanwhile, signaled it would not impose retaliatory tariffs as it seeks to engage the US in trade negotiations.
In commodities, Copper fell as much as 6.4 per cent at the start of trading on the London Metal Exchange. Bullion for immediate delivery, which has touched repeated record highs in recent weeks, fell as much as 1.3 per cent. Oil sank after Saudi Arabia slashed its flagship crude price by the most in more than two years. - Bloomberg
