Asian markets began the week on a weaker note, mirroring declines in U.S. stock futures as investors struggled to gauge the potential impact of upcoming tariff announcements from Washington.
S&P 500 futures dropped 0.6% in early trading on Monday, extending losses from the previous session, while Nasdaq futures declined by 1.1%. U.S. Treasury yields continued to slide as investors sought safer assets, pushing gold to a fresh record high.
The latest market jitters follow remarks from President Donald Trump, who stated on Friday that he was open to negotiating individual deals with countries aiming to avoid tariffs. However, reports over the weekend suggested that he was encouraging advisors to take a more aggressive approach. Speaking to reporters on Sunday, Trump signaled that tariffs would likely apply broadly, sending ripples through global markets.
Trump is expected to receive recommendations from his advisors on Tuesday, with an announcement of initial tariffs anticipated on Wednesday, followed by potential levies on automobiles the following day. However, details regarding the extent and specific targets of these tariffs remain unclear.
European leaders have warned of potential countermeasures, with German Chancellor Olaf Scholz indicating on Sunday that the European Union is prepared to respond with tariffs of its own. Simultaneously, reports suggest the EU may propose certain trade concessions in an effort to defuse tensions.
Economic Concerns Grow Amid Trade Uncertainty
Economists warn that heightened trade restrictions could weigh heavily on the U.S. economy while also limiting the Federal Reserve’s ability to adjust interest rates.
JPMorgan Chief Economist Bruce Kasman noted that recession risks have risen to 40% as concerns mount over the impact of protectionist policies on consumer and business confidence. He also pointed out that the latest round of tariff increases is expected to push U.S. core inflation above 4% in the coming quarter.
Recent data has already highlighted economic vulnerabilities. A key measure of core inflation exceeded expectations in February, while consumer spending showed signs of slowing. Investors will be closely watching Friday’s employment report, where job growth below the expected 140,000 could further fuel recession fears. Additionally, a series of economic indicators—including surveys on manufacturing and services, trade figures, and job openings—are due for release this week.
Global Market Reactions
The looming trade war has impacted global equities, with MSCI’s broadest index of Asia-Pacific shares outside Japan declining by 0.5%. Japan’s Nikkei plunged 3.2%, weighed down by automaker losses following Trump’s proposal of 25% tariffs on imported cars and light trucks.
In bond markets, investors appear to be betting that a slowdown in U.S. growth will eventually outweigh the short-term inflation boost from tariffs, potentially prompting the Federal Reserve to cut interest rates by approximately 70 basis points this year. As a result, 10-year Treasury yields declined to 4.215%.
Currency markets remained relatively stable, with the U.S. dollar edging down 0.1% to 149.35 yen, while the euro held steady at $1.0825. The dollar index remained at 104.00 after slipping in the previous two sessions.
Commodities and Energy Outlook
Gold, a traditional safe-haven asset, surged to an all-time high of $3,097 per ounce as investors sought refuge from market volatility.
Oil prices remained supported by U.S. sanctions on Venezuela and Iran, though concerns over global economic growth continue to weigh on the market. Brent crude rose 8 cents to $73.68 per barrel, while U.S. crude inched up by 2 cents to $69.38 per barrel.
In a further escalation of trade tensions, Trump stated on Sunday that he would consider imposing secondary tariffs ranging from 25% to 50% on Russian oil if he believes Moscow is obstructing efforts to end the war in Ukraine.
With global markets on edge, investors are looking ahead to Federal Reserve Chair Jerome Powell’s speech on Friday, which may offer further insight into the central bank’s policy stance amid growing economic uncertainty.