Stock Slump Deepens as Traders De-Risk, Bonds Rise
Global Markets Slide Ahead of New Tariffs
Asian stock markets opened lower on Monday as investors braced for a fresh wave of tariffs from Donald Trump.
- Benchmarks in Japan, South Korea, and Australia declined, reflecting growing trade war fears.
- S&P 500 futures also dropped, signaling potential weakness in US equities.
- The Australian and New Zealand dollars edged lower, while the yen strengthened as investors sought safe-haven assets.
Meanwhile, gold surged to a new record high, driven by concerns over economic instability amid a looming global trade war.
US Economic Data Signals Weakness
Recent US economic data has shown signs of slowing consumer sentiment, weaker spending, and rising prices.
- On Friday, US stocks declined, with traders reacting to worsening economic indicators.
- Given that this week marks the end of the quarter, volatility is expected to persist.
- Goldman Sachs economists now predict the Federal Reserve will cut interest rates three times in 2025, as tariffs dampen economic growth and increase unemployment.
Chris Weston, head of research at Pepperstone Group, highlighted that markets will be dominated by tariff-related headlines, as investors assess the broader impact of Trump’s policies.
Trump’s Potential Tariffs on Russian Oil Buyers
Trump reiterated his stance on Russian oil, threatening “secondary tariffs” on countries purchasing crude from Russia if a Ukraine ceasefire is not achieved.
- Given that Russia is the world’s third-largest crude producer, any new sanctions could disrupt global oil supply.
- Major importers like China and India could face significant economic impacts, adding to market uncertainty.
China’s Factory Data and Banking Sector in Focus
Investors in Asia will closely watch Chinese factory activity data to gauge whether previous stimulus measures are stabilizing the economy.
- Four of China’s largest state-owned banks plan to raise up to $72 billion in private placements.
- The Chinese finance ministry will lead the effort, injecting $69 billion, with new shares issued at a premium of 8.8% to 21.5% above Friday’s closing prices in Shanghai.
These measures aim to strengthen the banking sector and provide a stronger financial buffer to support economic growth.
Market Volatility Expected in Thailand and South Korea
- Thai markets are set to reopen after trading was suspended Friday due to a Myanmar earthquake, which triggered evacuations in Thailand and Vietnam.
- South Korean stocks may experience heightened volatility, as the country ends a 17-month-long ban on short selling.
Key Economic Events to Watch This Week
Several major economic events are expected to shape global markets in the coming days.
- Australia’s central bank is likely to keep interest rates unchanged as the country heads into a tight national election.
- European economic data will offer insight into the region’s growth prospects.
- US jobs data, due at the end of the week, will be closely watched for signs of labor market strength.
According to Barclays strategists led by Themistoklis Fiotakis, while soft economic data in the US has raised concerns, hard data remains more stable.
- This makes upcoming vacancy and employment surveys crucial in assessing the full impact of trade uncertainty.
Additionally, Federal Reserve Chair Jerome Powell is set to speak, providing further guidance on monetary policy amid economic slowdown fears.
