Asian stocks fell for a third straight session on Tuesday, mirroring steep losses on Wall Street as mounting concerns over tariffs and government upheaval threatened economic growth in the United States. The Nasdaq 100 suffered its worst day since 2022, dragging down markets across Australia, Japan, and South Korea. Investors retreated to safe-haven assets, pushing US Treasury yields lower while the dollar edged down.
The downturn in Asian equities followed a sharp selloff in the US, where the S&P 500 dropped 2.7% and the Nasdaq 100 plunged 3.8% on Monday. Major technology stocks were hit hard, with Tesla sinking 15% and Nvidia leading semiconductor stocks to their lowest levels since April.
Investors are growing anxious over US economic stability after President Donald Trump reignited a tariff war while making sweeping cuts to government spending and reshaping foreign policy. The shift in sentiment is striking, given that just weeks ago, Wall Street had welcomed Trump’s presidency with a surge in stocks, Bitcoin, and the dollar.
“We’ve gone from animal spirits to what are the odds of a recession,” said Gina Bolvin, president of Bolvin Wealth Management Group. “This is a headline-driven market; one that could change in an hour. Sit tight. Buckle up. We finally have the correction we were waiting for, and long-term investors will be rewarded again.”
Despite the global risk-off mood, Chinese investors continued snapping up Hong Kong stocks on Monday, undeterred by the broader market turmoil. Mainland buyers have been pouring into the market, fueling a rally in technology shares, which has been boosted by a revolutionary artificial intelligence model from startup DeepSeek.
The latest market slump marks a stark reversal from the optimism that has defined the past several years. The US economy had been defying expectations by remaining resilient even as global growth slowed. However, with fears of a recession growing, the long-held belief in American economic exceptionalism is now under threat.
“The market is adjusting to a new reality where the US is no longer seen as immune to global shocks,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “Investors are realizing that tariffs, government instability, and a potential economic slowdown could have real consequences.”
The turbulence has also affected bond markets, with the yield on 10-year US Treasuries sliding nine basis points to 4.21% on Monday as investors bet that an economic downturn would force the Federal Reserve to cut interest rates. The dollar gained 0.2%, while the selloff in risk assets led 10 high-grade companies to delay US bond sales. Oil prices also declined, with West Texas Intermediate crude falling to a six-month low.
Trump’s decision to reintroduce aggressive tariffs is raising fears of a prolonged trade war that could dampen global economic growth. Market strategists warn that if tensions escalate, businesses could scale back investments, worsening an already fragile economic outlook.
“The concern isn’t just the tariffs themselves,” said Priya Misra, head of global rates strategy at TD Securities. “It’s the uncertainty they create. Companies are hesitant to make big spending decisions when they don’t know what the rules of the game will be in six months.”
Tariffs aside, Trump’s recent government shakeups have only added to market jitters. His administration has seen multiple high-level firings and resignations, fueling fears of policy unpredictability. Investors worry that these moves could destabilize relationships with key trade partners and further strain the global economy.
Asia Markets
Asian markets bore the brunt of the US-led selloff:
- Japan’s Topix fell 1.9%, tracking Wall Street’s losses.
- Australia’s S&P/ASX 200 declined 1.3%.
- South Korea’s Kospi also dropped, with tech stocks leading the decline.
Equity futures for both the S&P 500 and Nasdaq 100 continued to slip in early Asian trading, signaling that the downturn may not be over.
Europe Braces for Contagion
European stock futures also pointed to losses:
- Euro Stoxx 50 futures fell 1.5%, suggesting that the selloff could spread when European markets open.
Cryptocurrency Markets Slump
The risk-off sentiment extended to digital assets:
- Bitcoin fell 1.3% to $78,244.38.
- Ether dipped 0.2% to $1,865.1.
The cryptocurrency market, which had initially benefited from optimism surrounding Trump’s presidency, is now seeing pressure as investors flee to safety.
Amid the turmoil, government bonds gained as investors sought refuge from the market chaos. The yield on the benchmark 10-year US Treasury declined one basis point to 4.20%.
- Japan’s 10-year bond yield climbed five basis points to 1.57%.
- Australia’s 10-year bond yield declined five basis points to 4.39%.
Fears of slowing demand weighed on crude prices:
- WTI crude slipped 0.5% to $65.70 per barrel.
Despite the broader market volatility, spot gold remained little changed, reflecting mixed investor sentiment on safe-haven assets.
Markets remain on edge ahead of key economic data releases this week:
- Tuesday: Japan GDP, US job openings.
- Wednesday: Canada rate decision, US CPI (inflation report).
- Thursday: Eurozone industrial production, US PPI, initial jobless claims.
- Friday: US University of Michigan consumer sentiment index.
Traders are particularly focused on Wednesday’s US Consumer Price Index (CPI) report, which could influence Federal Reserve policy decisions. A higher-than-expected inflation reading could delay rate cuts, adding to market uncertainty.
With market sentiment shifting rapidly, analysts caution against making hasty decisions. Volatility is expected to remain high as investors digest the impact of Trump’s policies and upcoming economic data.
“Long-term investors should stay the course,” said Bolvin. “This is the correction that many were waiting for, and ultimately, there will be opportunities on the other side.”
For now, the market’s focus remains on US economic stability, Federal Reserve policy, and geopolitical risks. Until clarity emerges, investors should brace for further turbulence.
