The global equity rout extended into Asian markets on Tuesday, dragging U.S. equity-index futures to fresh lows as investors feared that tariffs and government spending cuts would derail economic growth in the world’s largest economy. Bonds rallied as investors sought safety.
Asian shares tumbled to a five-week low after the Nasdaq 100 suffered its worst day since 2022. Australia’s stock market hit a seven-month low, while Japan’s Nikkei 225 sank to its weakest level since September. However, markets found some stability in mid-morning trade, with S&P 500 futures paring earlier losses of over 1%, and stocks in Hong Kong and China trimming their declines. U.S. Treasury yields fell, with the 2-year yield touching its lowest level since October, while the dollar weakened against most major currencies.
Investor sentiment has turned increasingly bearish amid concerns that U.S. economic growth is faltering under President Donald Trump’s tariff war and spending cuts, which have disrupted long-standing geopolitical relationships. This marks a sharp reversal from the initial optimism that greeted Trump’s presidency, when Wall Street saw stocks, Bitcoin, and the dollar surge.
“The selloff felt like a liquidation of any overweight/crowded positions, combined with a buyers’ strike,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group. “Why buy now when Trump is not concerned with the stock market and Powell said he’s not in a rush?”
Citigroup Inc. downgraded U.S. stocks to neutral from overweight, citing a pause in U.S. exceptionalism, while upgrading China to overweight due to its attractive investment outlook. HSBC strategists also raised their rating on European equities (excluding the UK) to overweight, citing expected eurozone fiscal stimulus as a potential game-changer.
On Monday, the S&P 500 fell 2.7%, while the Nasdaq 100 plunged 3.8%. Tesla Inc. tumbled 15%, and Nvidia Corp. led a slump in chipmakers to their lowest level since April. The bond market also saw turmoil, with about 10 high-grade companies delaying U.S. bond sales.
Airline stocks suffered as economic concerns weighed on travel demand. Australia’s Qantas Airways Ltd. and Japan’s ANA Holdings Inc. mirrored Delta Air Lines Inc.’s decline after the U.S. carrier slashed its profit expectations for the first quarter, citing volatility and flight safety concerns.
Despite the risk-off sentiment, mainland Chinese investors continued pouring money into Hong Kong stocks, particularly in the technology sector, which has been buoyed by AI advancements. The Hang Seng Index is up 18% this year, in contrast to weaker performances in other Asian markets. MSCI’s Asia-Pacific gauge has gained just 1% since December.
In currency markets, most Group-of-10 currencies advanced against the U.S. dollar, with the Swiss franc and Japanese yen outperforming as traditional safe-haven assets. The euro remained strong, bolstered by improved regional growth prospects.
Japan’s economy grew at an annualized rate of 2.2% in the final quarter of last year, a downward revision from the initially reported 2.8%, potentially influencing the Bank of Japan’s policy stance in its upcoming meeting.
Meanwhile, commodities faced pressure, with oil falling for a second straight day, mirroring the broader equity selloff amid fears that tariffs and economic policies would stifle global growth. Gold, however, remained steady.
