NEW YORK: Asian shares bounced back after the worst day on record, as Japan leads gains on expectations that it will get priority in trade talks with US President Donald Trump’s administration. Treasuries steadied after Monday’s (April 7) sharp selloff, while US equity-index futures rose.
Benchmark gauges in Japan rose more than six per cent, along with futures contracts for the US and Europe. Shares in Hong Kong and China fluctuated at the open after Trump threatened to slap additional 50 per cent tariffs on China. The dollar slipped against major peers while the yuan fell to its weakest level since 2023. Oil gained while gold advanced for the first time in four days.
Fears of an economic downturn led to sharp swings in US markets with the S&P 500 index nearing a bear market before finishing slightly down Monday as investors absorbed further tariff news. Trump, who signaled he could be open to some negotiations, said he wasn’t considering a pause on his plan to implement additional tariffs on dozens of countries despite outreach from trading partners eager to avoid the levies.
"Its too early to say that we have turned the corner particularly with Trump still floating the idea of additional tariffs on China,” said Tim Waterer, chief market analyst at KCM Trade. "There are lots of moving parts and a recession remains in the equation as a possibility whiles the US continues to play hardball with tariffs.”
Trump made a litany of comments Monday about his planned duties on worldwide trading partners. Yet the president offered little clarity about what he is seeking from trading partners in exchange for lowering duty rates - or whether he’s willing to offer relief at all. Washington and Wall Street remained engulfed in confusion about how to gain exceptions from his sweeping global tariffs.
On Tuesday, China slammed the US for threatening to raise tariffs and pledged to retaliate if Washington follows through.
"The US threat to escalate tariffs on China is a mistake on top of a mistake, which once again exposes the blackmail nature of the US,” the Chinese Ministry of Commerce said in a Tuesday statement. "If the US insists on its own way, China will fight to the end.”
Waves of volatility shook markets Tuesday with stocks, bonds and commodities getting whipsawed by another deluge of headlines around tariffs. The S&P 500’s bottom-to-top intraday reversal was the biggest since 2020 when Covid upended global trading, while the Cboe Volatility Index pushed away from the 60 mark hit earlier Monday.
Meanwhile, China’s central bank said it will provide support to a sovereign fund when needed as it firmly supports its decision to buy more stocks. The People’s Bank of China will step up funding aid via a re-lending programme to Central Huijin Investment Ltd. when it’s necessary, in order to safeguard the stability of capital markets.
Also, China’s state-backed funds are planning to buy local stocks in a bid to support the market, as an escalating trade war with the US eroded this year’s rally.
In the bond market, Treasuries fell Monday, erasing a portion of their biggest weekly advance since August. The yield on the ten-year rose 19 basis points as investors liquidated profitable trades to cover equity losses. Australian and New Zealand bonds tracked the moves.
"Last night’s price action was more about de-risking and taking profit on those trades which are in the money to cover losses on other assets such as equities,” said Damien McColough, Sydney based head of fixed income research at Westpac Banking Corp.
Traders’ bets on how much the Federal Reserve will lower US interest rates this year have been fluctuating. At least three reductions are now reflected in overnight interest-rate swaps this year, with the first fully priced in for June.
In Asia, stocks plunged from Tokyo to Mumbai Monday with a regional gauge tumbling 8.7 per cent, the worst on record. That index gained as much as 2.6 per cent Tuesday.
"The market is finding a temporary bottom, which could lead to a new probe of the downside before stabilising,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management. "Investors are waiting for President Trump to blink. The pressures on him to explain to the public and investors what is the endgame are mounting. He will not want to capitulate too fast, but we are close.”
Japanese shares jumped as Trump assigned two members of his cabinet to kick off bilateral trade talks after a call with Prime Minister Shigeru Ishiba. Japan appeared set to get priority over other US trading partners in talks on tariffs, putting Tokyo at the head of a long queue of nations seeking to roll back the levies.
"I don’t think we’ve progressed any further in terms of getting clarity on where this trade negotiation lies,” said Peter S. Kim, investment strategist at KB Securities. "I think the market’s been very surprised by the intensity and the scale of the trade war and weaponising of it.” - Bloomberg
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