(Bloomberg) — Asian shares were poised for their worst drop in a month as concerns about upcoming US tariffs and a widening trade war weighed on investor risk appetite. Gold rose to a record on demand for safe havens.
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A regional gauge of equities fell 1.3% and Taiwan’s index touched the lowest level since September as technology companies weighed. Japanese shares dropped partly due to Friday being the ex-dividend date for most companies in the fiscal year-end. Cryptocurrencies retreated and yields on the 10-year US Treasury fell slightly. Equity-index futures for Europe showed stocks may be under pressure while contracts for US were little changed.
From New York to London and Hong Kong, investors are cutting back risk ahead of President Donald Trump’s plan to announce so-called ‘reciprocal tariffs’ on April 2, after slapping levies on imports of all automobiles into the country. Traders, already wary of how the moves will impact inflation and growth in the US economy, are chalking up different strategies to deal with the situation.
“It is a fool’s errand to try and predict what Trump will do,” said Aberdeen Investments’ Singapore-based Xin-Yao Ng. But the plan is “to make sure we are invested in companies where their own destiny isn’t as affected by tariff decisions. Then we take advantage of volatility, if any, to bargain hunt if there is meaningful weakness.”
Trump, who has touted his April 2 announcement on tariffs as a ‘Liberation Day,’ escalated his trade war this week by slapping a 25% tariff on all cars not made in the US. Reciprocal duties that are set to be announced next week will be “very lenient,” he said.
“Markets are still underpricing risks towards announced tariffs,” Kaanhari Singh, Barclays head of Asia cross asset strategy, said in a Bloomberg TV interview. “And that’s not even counting for what could come on April 2 in terms of reciprocal tariffs.”
All around the world, money managers say they’re turning neutral, stepping back or de-risking their portfolios. Volumes in Treasuries have fallen as traders refrain from taking big positions, with some looking to options trades for insurance before Trump unveils the levies next week.
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Following data showing the US economy picked up pace in the fourth quarter, investors will now get another chance to gauge economic health on Friday when US personal consumption expenditures price index, or PCE, is unveiled. It’s the Federal Reserve’s preferred measure of underlying inflation.
“The data tonight takes on greater importance because of the Trump administration’s trade policy,” wrote Kyle Rodda, a senior market analyst at Capital.com.
The 30-year US yield exceeded its five-year equivalent by the widest gap since early 2022, with shorter-maturity bonds more impacted by the prospect of potential Fed interest-rate cuts should US growth slow. The net result in the bond market is a so-called steeper curve.
Long-maturity Treasury yields reached the highest levels in a month Thursday as investors demanded compensation for the risk that tariffs will spur US inflation. Fed Bank of Boston President Susan Collins said tariffs will likely cause price pressures in the near term, but it was unclear how long that would last.
In Japan, inflation in Tokyo accelerated, keeping the Bank of Japan on track for gradual interest rate hikes. The yen gained against the dollar following the report, strengthening to around the 150.70 level.
Australian stocks were little changed after the country announced national election will be held on May 3.
In corporate news, Nio Inc.’s Hong Kong-listed shares fell as much as 8.1% after the Chinese electric vehicle maker’s $518 million share placement.
In commodities, oil headed for a third weekly advance as the market braced for more tariffs from the Trump administration. Bullion gained as much as 0.7% on Friday to an all-time high of more than $3,077.60 an ounce.
Several major banks have raised their price targets for the precious metal, with Goldman Sachs Group Inc. this week ramping up its forecast to $3,300 an ounce by year-end.
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 2:24 p.m. Tokyo time
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Nikkei 225 futures (OSE) fell 1.3%
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S&P/ASX 200 futures were little changed
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Japan’s Topix fell 2.5%
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Hong Kong’s Hang Seng fell 1.2%
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The Shanghai Composite fell 0.7%
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Euro Stoxx 50 futures fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro fell 0.1% to $1.0788
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The Japanese yen was little changed at 150.91 per dollar
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The offshore yuan was little changed at 7.2747 per dollar
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The Australian dollar fell 0.3% to $0.6283
Cryptocurrencies
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Bitcoin fell 1.4% to $86,093.01
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Ether fell 4.3% to $1,921.07
Bonds
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The yield on 10-year Treasuries declined two basis points to 4.34%
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Japan’s 10-year yield declined 2.5 basis points to 1.555%
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Australia’s 10-year yield declined four basis points to 4.46%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Abhishek Vishnoi, Liz Capo McCormick and Aya Wagatsuma.
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