Asian Stocks Tumble As Markets Call For Swift US Interest Rate Reductions

Key stock indices dropped in Asia on Monday as U.S. President Donald Trump indicated he would not back down from his extensive tariff proposals, while investors speculated that the increasing risk of recession might prompt the Federal Reserve to lower rates as soon as May. Futures markets quickly adjusted to factor in nearly five quarter-point reductions in U.S. rates this year, significantly lowering Treasury yields and weakening the dollar's appeal as a safe haven. The destruction occurred as Trump informed reporters that investors would need to face the consequences and that he would not finalise a deal with China until the U.S. trade deficit was resolved. Beijing announced that the markets had communicated their plans for retaliation, per a Reuters report.

"The sole genuine circuit breaker is President Trump's iPhone, and he exhibits minimal indication that the market decline is troubling him to the extent of rethinking a policy position he has held for many years," stated Sean Callow, a senior FX analyst at ITC Markets in Sydney.

Investors believed that the loss of trillions of dollars in wealth and the probable severe impact on the economy would lead Trump to rethink his strategy. "The extent and disruptive effect of U.S. trade policies, if they continue, could be enough to push both a still robust U.S. and global growth into recession," stated Bruce Kasman, JPMorgan's head of economics, estimating the likelihood of a downturn at 60 per cent. "We still anticipate the first Fed easing to occur in June," he mentioned. "Nonetheless, we now believe the Committee will reduce rates at each meeting until January, lowering the upper limit of the funds rate target range to 3.0 per cent."

S&P 500 futures dropped 3.5 per cent in erratic trading, whereas Nasdaq futures plummeted 4.4 per cent, contributing to nearly $6 trillion in market losses from last week. The suffering similarly spread across Europe as EUROSTOXX 50 futures slid 3.6 per cent, while FTSE futures dropped 2.3 per cent and DAX futures decreased by 4.0 per cent. Japan's Nikkei fell by 6.6 per cent (.N225) to reach lows not seen since late 2023, while South Korea (.KS11) experienced a 5 per cent decline. MSCI's most comprehensive index of Asia-Pacific stocks excluding Japan (.MIAPJ0000PUS) dropped a staggering 7.5 per cent. Chinese blue chips (.CSI300) dropped by 6.3 per cent as investors anticipated whether Beijing would introduce additional stimulus measures. Taiwan's primary index, which was closed on Thursday and Friday, fell by almost 10 per cent (.TWII), prompting authorities to limit short selling.

The entirety of emerging Asia was also submerged, with India's Nifty 50 (.NSEI) opening new tab plummeting 4 per cent. The dimmer perspective on worldwide growth maintained significant pressure on oil prices after sharp declines the previous week. Brent dropped $1.35 to $64.23 a barrel, whereas U.S. crude plummeted $1.395 to $60.60 per barrel.

The move towards safe assets caused 10-year Treasury yields to fall by 8 basis points to 3.916 per cent, as Fed fund futures rose to reflect an additional quarter-point rate reduction from the Federal Reserve this year. Markets fluctuated to suggest roughly a 54 per cent likelihood that the Fed might lower rates as early as May, despite Chair Jerome Powell stating on Friday that the central bank was not in a rush regarding rates. This dovish shift caused the dollar to decline an additional 0.5 per cent against the safe-haven Japanese yen to 146.16 yen, while the euro remained steady at $1.0966. The dollar dipped by 0.6 per cent against the Swiss franc, while the trade-sensitive Australian dollar fell an additional 0.4 per cent.

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Investors were additionally betting that the impending risk of recession would surpass the probable increase in inflation caused by tariffs. A U.S. consumer price data set to be released later this week is anticipated to indicate another increase of 0.3 per cent for March; however, analysts believe it is only a question of time until tariffs drive prices significantly higher across categories such as food and automobiles. Increasing expenses will likewise strain company profit margins, coinciding with the start of the earnings season, as several major banks report on Friday. Approximately 87 per cent of U.S. businesses will announce results from April 11 to May 9.

"Analysts at Goldman Sachs noted in a report that we anticipate fewer companies than typical will offer forward guidance for both the second quarter and full year of 2025 during the upcoming quarterly earnings calls."

"They cautioned that increasing tariff rates will compel numerous companies to either increase prices or tolerate reduced profit margins."

"We anticipate downward adjustments to consensus profit margin projections in the upcoming quarters." Even gold experienced a decline in the selloff, falling 0.3 per cent to $3,026 per ounce. The decline had dealers speculating whether investors were securing profits to offset losses and margin calls on different assets, potentially leading to a self-perpetuating fire sale.