SYDNEY- Major stock indexes plunged in Asia on Monday as US President Donald Trump showed no sign of backing away from his sweeping tariff plans, and investors bet the mounting risk of recession could see the Federal Reserve cutting rates as early as May.
Futures markets moved swiftly to price in almost five quarter-point cuts in US rates this year, pulling Treasury yields down sharply and hampering the dollar on safe havens.
The carnage came as Trump told reporters that investors would have to take their medicine and he would not do a deal with China until the US trade deficit was sorted out. Beijing declared the markets had spoken on their retaliation plans.
“The only real circuit breaker is President Trump’s iPhone and he is showing little sign that the market selloff is bothering him enough to reconsider a policy stance he has believed in for decades,” said Sean Callow, a senior FX analyst at ITC Markets in Sydney.
Investors had thought the loss of trillions of dollars in wealth and the likely body blow to the economy would make Trump reconsider his plans.
“The size and disruptive impact of US trade policies, if sustained, would be sufficient to tip a still healthy US and global expansion into recession,” said Bruce Kasman, head of economics at JPMorgan, putting the risk of a downturn at 60 percent.
“We continue to expect a first Fed easing in June,” he added. “However, we now think the Committee cuts at every meeting through January, bringing the top of the funds rate target range down to 3.0 percent.”
S&P 500 futures slid 3.5 percent in volatile trade, while Nasdaq futures dived 4.4 percent, adding to last week’s almost $6 trillion in market losses.
The pain likewise engulfed Europe, with EUROSTOXX 50 futures down 4.4 percent, while FTSE futures lost 2.1 percent and DAX futures 4.2 percent.
Japan’s Nikkei sank 6.6 percent to hit lows last seen in late 2023, while South Korea dropped 5 percent. MSCI’s gauge of Asia-Pacific shares fell a gut-wrenching 7.8 percent to head for its largest single-day drop since 2008.
