Asian Stocks Slide As US Growth Worries Grip Markets

SINGAPORE: Asian equities dropped significantly on Tuesday as a market downturn continued amid growing concerns that a broad trade conflict might harm U.S. economic expansion and usher in a recession, prompting anxious investors to seek refuge in the stable Japanese yen. Investor worries regarding a possible economic downturn intensified after President Donald Trump mentioned a "period of transition" in a Fox News interview and refrained from forecasting whether his tariffs would lead to a U.S. recession. Those remarks and concerns drained risk appetite, causing stocks to decline and adversely affecting the U.S. dollar and Treasury yields. 

In Asia, stocks suffered widespread losses, with Japan's Nikkei (.N225) and Taiwan stocks (.TWII) reaching their lowest points since September. Australia's benchmark index (.AXJO) ended 0.8 per cent down, having reached a seven-month low earlier today.

Market Downturn, US Recession Fears

Even Chinese stocks, which have experienced significant gains this year, were not spared from the pessimistic atmosphere. The blue-chip index (.CSI300) decreased by 0.5 per cent, while Hong Kong's Hang Seng Index (.HIS) dropped by 1 per cent. Asian markets were influenced by Wall Street, where the S&P 500 (.SPX) dropped 2.7 per cent on Monday, marking its largest one-day decline this year, while the Nasdaq (.IXIC) fell 4.0 per cent, recording its steepest single-day percentage decrease since September 2022. Concerns about an economic decline have triggered a stock market decline that has erased $4 trillion from the S&P 500’s high point last month. The S&P and Nasdaq futures reduced significant losses from early Tuesday morning in Asia to trade a little higher before the European market opens. European futures also levelled off, indicating a stable beginning.

Prashant Newnaha, a senior rates strategist for the Asia-Pacific region at TD Securities, stated that the majority of traders thought Trump would back down if the stock market plummeted. Markets have received the message that the administration is determined to tear off the band-aid. Tariffs and an economic downturn could be the remedy for achieving disinflation and lowering that 10-year yield. For the time being, it's a regulated demolition. The yield on U.S. 10-year benchmark notes decreased by 2 basis points on Tuesday, following a decline of 10 bps in the prior session, marking the biggest daily fall in nearly a month. The yield on the two-year note, which generally aligns with interest rate forecasts for the Federal Reserve, dropped to a five-month low and was recently down 1.5 bps at 3.8808 per cent.

Traders are currently factoring in 85 bps of easing from the Fed this year, up from 75 bps on Monday, according to LSEG data, anticipating that sluggish U.S. growth will force the Federal Reserve to begin easing again. Wednesday's U.S. consumer price index report might thwart those expectations if it verifies that inflation remains elevated, compelling the Fed to maintain a tighter monetary policy. Investors are aware of the higher-than-anticipated CPI figures from last month, which indicated a 0.5 per cent increase in inflation for January, marking its largest monthly rise since August 2023. A Reuters survey predicts that February's CPI has likely risen by 0.3 per cent. 

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"In the short term, inflation remains persistent, and tariffs are expected to contribute to inflation, as will changes in immigration policies," stated Appio. In currency markets, safe havens continued to be sought after, although changes were not as pronounced as the previous day. The Japanese yen hit its highest level in five months against the dollar before losing its advance to remain steady at 147.2. Nonetheless, the yen has risen 7 per cent in value compared to the dollar in 2025. The euro increased 0.6 per cent to $1.10898 as well. In the commodities market, oil prices remained stable as investors dealt with concerns that U.S. tariffs could hinder global economies and reduce energy demand while OPEC+ increases its supply. Gold prices increased to $2,908 per ounce, approaching a record peak reached last month. So far, Gold has risen by 10 per cent, following a 27 per cent increase the previous year.