(Bloomberg) — Asian stocks bounced back after the worst day on record, snapping a global slump sparked by concerns that President Donald Trump’s trade war will hurt economic growth. Treasuries steadied after Monday’s sharp selloff, while US equity-index futures rose.
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Shares in Japan and Australia advanced at the open along with futures contracts for US and European stocks. Contracts for Hong Kong pointed to losses after a gauge of US-listed Chinese shares fell more than 5% after Trump threatened to slap additional 50% tariffs on China. The dollar slipped against major peers.
Fears of an economic downturn led to sharp swings in US markets with the S&P 500 index nearing a bear market before finishing slightly down Monday as investors absorbed further tariff news. Trump, who signaled he could be open to some negotiations, said he wasn’t considering a pause on his plan to implement additional tariffs on dozens of countries despite outreach from trading partners eager to avoid the levies.
“The market is finding a temporary bottom, which could lead to a new probe of the downside before stabilizing,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management. “Investors are waiting for President Trump to blink. The pressures on him to explain to the public and investors what is the endgame are mounting. He will not want to capitulate too fast, but we are close.”
In the bond market, Treasuries fell Monday, erasing a portion of their biggest weekly advance since August. The yield on the 10-year rose 19 basis points as investors liquidated profitable trades to cover equity losses. Australian and New Zealand bonds tracked the moves.
“The turnaround in yields was puzzling,” particularly against the tariff backdrop, wrote strategists at JPMorgan Chase & Co., including Jay Barry. “Without a significant fundamental catalyst, we think technicals may have exacerbated the move, especially against a backdrop of very thin market liquidity.”
Traders’ bets on how much the Federal Reserve will lower US interest rates this year have been fluctuating. At least three reductions are now reflected in overnight interest-rate swaps this year, with the first fully priced in for June.
In Asia, Chinese shares plunged on Monday while sovereign yields neared an all-time low as investors braced themselves for the fall-out from a spiraling trade conflict between the world’s two largest economies.
