SINGAPORE- Asian stocks fell sharply on Tuesday as a market selloff extended on mounting worries that a wide-ranging trade war could dent US economic growth and lead to a recession, sending skittish investors to the safe-haven Japanese yen.
Investor concerns about the potential economic slowdown were exacerbated after President Donald Trump in a Fox News interview talked about a “period of transition” while declining to predict whether his tariffs would result in a US recession.
Those comments and worries sapped risk sentiment, sending stocks sliding and weighing on the US dollar and Treasury yields.
In Asia, stocks were battered across the board with Japan’s Nikkei and Taiwan stocks sliding about 3 percent, hitting their lowest level since September. Australia’s benchmark index was 0.8 percent lower having touched a seven-month low earlier in the day.
Even Chinese stocks, which have been on a tear this year, were not immune to the downbeat mood. The blue-chip index fell 0.5 percent, while Hong Kong’s Hang Seng Index was 0.8 percent lower.
Asian markets were taking their cues from Wall Street where the S&P 500 fell 2.7 percent on Monday, its biggest one-day drop this year, while the Nasdaq slid 4.0 percent, its biggest single-day percentage drop since September 2022.
Fears of an economic downturn have driven a stock market selloff that has wiped out $4 trillion from the S&P 500’s peak last month.
S&P and Nasdaq futures cut steep losses from early Asian morning on Tuesday to trade mostly flat ahead of European open. European futures stabilized as well and pointed to a muted start.
Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities, said most traders believed Trump would blink if stocks tanked.
“Markets have now gotten the memo that the administration is intent on ripping the band-aid off. Tariffs and recession may be the medicine to create disinflation and getting that 10-year yield lower. For now it’s a controlled demolition.”
