Fears of a global trade war are casting a heavy shadow over Asian stock markets, which are dramatically extending losses as US President Donald Trump's tariffs fueled a risk-off mood among investors.
Hong Kong markets led the region's losses, with the Hang Seng index down 10,37%. Meanwhile, mainland China's CSI 300 fell 6,31%. In Japan, the benchmark Nikkei 225 index lost 6,39% to an 18-month low, while the broader Topix index fell 6,50%. Trading in Japanese futures was suspended earlier in the day. In South Korea, the Kospi index was last down 4,74%, while the small-cap Kosdaq index fell 4,01%.
Australia's S&P/ASX 200 index extended losses to 3,87%. The benchmark index slipped into correction territory, falling 11% from its last high in February in its previous session. India's benchmark Nifty 50 index fell 3,85% at the open, while the broader BSE Sensex index fell 5,29%.
US futures fell as investors' hopes that the Trump administration would have successful negotiations with countries to lower interest rates were dashed.
Meanwhile, U.S. oil prices fell below $60 a barrel on Sunday in the U.S. Futures linked to U.S. West Texas Intermediate crude fell more than 3% to $59,74, their lowest level since April 2021. Trump's top economic officials dismissed fears of inflation and recession, saying tariffs would remain in place no matter what markets did.
Trump: "Sometimes you have to take your medicine"
The American president himself tried a few hours ago to downplay the panic in international stock markets by likening the situation to taking "medicine", in this case to treat pathologies of the American economy.
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Speaking to reporters on the presidential plane, as electronic trading signals a new spectacular fall on Wall Street today, Trump assured that his country is “much stronger” after announcing his measures, while assuring that the fall in the stock markets was not something he intended. “But I want to solve the issue of the (trade) deficit that we have with China, with the European Union and with other countries,” he insisted. “I don’t want the fall” of any stock market, “but sometimes you have to take your medicine to get well,” he added, apparently referring to the dependence of the American economy on imports. “The only way to solve this problem is customs duties,” he repeated.
Mr. Trump revealed that over the weekend he had spoken to “a lot of Europeans, Asians, all over the world.” “They all desperately want to make a deal,” he boasted. Asked about the possibility of negotiating a free trade agreement — in other words, a tariff-free one — between the U.S. and the EU, as suggested by his advisor and ally Elon Musk, President Trump reiterated that in his view, “Europe has made a fortune on our backs and treated us very badly.” “They want to talk, but there won’t be a talk because they don’t give us a lot of money on a yearly basis” buying American products, he said.
It is recalled that stocks in the US recorded a sharp selloff last Friday after China retaliated with new tariffs on American products, sparking fears of a global trade war that could lead the world's largest economy into recession.
The Dow Jones Industrial Average fell 2.231,07 points, or 5,5%, to 38.314,86 on Friday, its biggest drop since June 2020 during the pandemic.
The S&P 500 plunged 5,97% to 5.074,08 points, the biggest drop since March 2020.
Meanwhile, the Nasdaq Composite, which tracks many technology companies that sell to and manufacture in China, fell 5,8% to 15.587,79, putting the index down 22% from its December record, effectively a bear market in Wall Street parlance.
VIX rise reveals global panic in stock markets
As the stock market decline accelerates around the world, the fear index shows that the US is in the lead, Bloomberg reports.
The rise in the Cboe Volatility Index last week pushed the gauge of expectations for US stock movements to its highest level since the early days of Covid 2020, compared with similar measures from India, South Korea and Australia. The VIX reached its highest level this year compared with the European VStoxx index and the HSCEI volatility index of the largest Chinese companies traded in Hong Kong.
Asian markets crash – 'Sometimes you have to take your medicine,' says Trump
The VIX is now at its highest level since March 2020 against the second-month futures contract, BTIG Plc technical strategist Jonathan Krinsky wrote in a note dated Sunday.
"Markets often move beyond what many consider likely or possible," he said, adding that a further decline in the US stock market "seems likely" for Monday.
He noted that the 200-week moving average for the S&P 500 is about 8% below Friday's low and that the index has had only two "sustained breaks" below that level in the past 40 years: during the bear market at the turn of the century and during the 2008-2009 financial crisis.
And as for the VIX curve inversion, “while it can always become more extreme, it is currently in the panic zone,” Krinsky wrote.
Source: protothema
