Stock rout worsens, bonds rally on tariff turmoil: Markets wrap

A flight from global equities accelerated Monday and investors piled into haven assets as the fallout from US President Donald Trump’s tariffs deepened after China announced retaliatory measures.

Stocks tumbled from Tokyo to Mumbai, sending a gauge of Asian shares lower by almost 8 per cent, the worst intraday drop in more than 16 years.

Equity-index futures for US and Europe both fell by more than 3.7 per cent.

Oil retreated along with yields on two-year Treasuries, the most policy sensitive bonds. The dollar was mixed against major peers, with traditional haven currencies like the yen and Swiss franc outperforming.

Credit-default swaps in Asia blew out by the most since the Covid-19 pandemic in 2020.

Hong Kong’s benchmark index had its biggest intraday drop since 2008 as Beijing announced 34 per cent tariffs on all imports from the US with a gauge of Chinese technology stocks sinking as much as 16 per cent.

Taiwan’s equity index tumbled the most on record.

Fallout

From Bill Ackman to Stanley Druckenmiller, investors have condemned Trump’s decision to launch expansive global tariffs in an attempt to reshape global trade in Washington’s favour.

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.”

Selloff

There were signs the selloff was beginning to disrupt normal market operations. Japan experienced a so-called circuit-breaker given the magnitude of the losses, while South Korea briefly halted sell orders for program trading.

Companies have altered business plans and equity strategists have trimmed forecasts as investors remain wary about the impacts from the tit-for-tat levies. The tariffs would likely push the US and possibly the global economy into a recession in 2025 if they remain in place, according to JPMorgan’s Chief Economist Bruce Kasman. Goldman Sachs Group Inc. economists raised their recession probability assessment and brought forward the forecast timing of the next Fed rate cut.

Fears dismissed

Trump and his economic team dismissed investors’ fears of inflation and recession, offering no apologies for the market turmoil and defiantly insisting a boom is on the horizon. Trump, speaking Sunday on Air Force One, repeatedly defended the tariff barrage unveiled last week.

“Forget markets for a second — we have all the advantages,” Trump said.

On Friday, the S&P 500 saw its worst two-day plunge since March 2020 in a sellof that slashed over $5 trillion in value, with the gauge down 6%. The Nasdaq 100 entered a bear market. Wall Street has become more pessimistic about the president ditching his policies once stocks decline - the so-called ‘Trump put’ - as the president had in the past touted the equities market as a report card.

“Trump put, Fed put and Xi put have all gone missing at once,” said Charu Chanana, Chief Investment Strategist at Saxo Markets. “Markets are grappling with a classic growth scare, which may now outweigh the inflation narrative.”

The surge in the Cboe Volatility Index last week took the gauge of expectations for US equity moves to its highest level since the early Covid days of 2020 relative to similar measures from India, South Korea and Australia.

“We’re seeing a proper capitulation in the share market,” said Jun Bei Liu, founder of hedge fund Ten Cap Pty. “This volatility will remain for some time.” That said, that there are lots of buying opportunities for companies that aren’t impacted by trade, she said.

(Get the Markets Daily newsletter to learn what’s moving stocks, bonds, currencies and commodities.)

A rally in US government debt sent the US two-year yield to touch the lowest since 2022 last week. Swaps traders are now pricing in more than four quarter-point cuts by the Fed by the end of the year compared with around three on April 1, the day before Trump’s announcements. The 10-year Treasury yield may drop to 3% by the end of this year, according to TD Securities.

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.

Which markets will best weather the tariff storm? Tell us in the latest MLIV Pulse survey.

“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.”

China’s policymakers discussed measures over the weekend to stabilize the economy and the markets in the face of the tariff onslaught, including whether to accelerate plans to unleash stimulus to bolster consumption, according to people familiar with the matter. 

Meanwhile, Japanese Prime Minister Shigeru Ishiba said he would go to the US as soon as possible to pitch a wide-ranging deal with Trump over tariffs. The president had previously said that he is open to reducing tariffs if other nations offer something “phenomenal.”  

In commodities, copper and other metals reversed earlier drops. Oil sank after Saudi Arabia slashed its flagship crude price by the most in more than two years. Cryptocurrencies sold off sharply, underscoring a clear risk-off sentiment across markets.

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities