Stock markets across Asia plunged on Monday amid growing fears of a global economic slowdown, as investors braced for a potential series of rapid interest rate cuts by the United States Federal Reserve following signs that Washington would press ahead with aggressive trade tariffs.
Key Asian indexes suffered heavy losses, with Japan’s Nikkei 225 tumbling 6 per cent to levels not seen since late 2023. South Korea’s KOSPI dropped 5pc, while China’s CSI300 fell 4.4pc. Taiwan’s main index saw the steepest decline, plunging nearly 10pc after a two-day market closure, prompting authorities to curb short-selling.
The latest bout of market turmoil was triggered by renewed trade tensions, as U.S. President Donald Trump ruled out any immediate deal with China, insisting the American trade deficit must be addressed first. “Investors will have to take their medicine,” Mr Trump said, signaling no retreat from his long-held stance on tariffs.
Beijing, responding to Washington’s position, said markets had “spoken” in reaction to the U.S. moves and hinted at further retaliatory measures.
Futures tied to U.S. markets reflected the deepening anxiety. S&P 500 futures slipped 3.1pc, while Nasdaq futures sank 4pc in volatile trade, extending last week’s rout that wiped nearly $6 trillion off global equities. European markets were also swept into the sell-off, with EUROSTOXX 50, FTSE 100 and Germany’s DAX futures down 3pc, 2.7pc and 3.5pc, respectively.
The deteriorating outlook for global growth weighed on commodity prices as well. Brent crude fell $1.35 to $64.23 a barrel, while U.S. crude declined by $1.40 to $60.60.
“The size and disruptive impact of U.S. trade policies, if sustained, would be sufficient to tip a still healthy U.S. and global expansion into recession,” warned Bruce Kasman, chief economist at JPMorgan, who now places a 60pc probability on a downturn. He said the Federal Reserve could begin cutting rates from June, with potential rate cuts at every policy meeting through January 2026.
Reflecting the grim sentiment, investors moved into safe-haven assets. The yield on 10-year U.S. Treasury notes dropped eight basis points to 3.916pc, while the dollar softened against the yen and Swiss franc. The euro held firm at $1.0961. Meanwhile, the Australian dollar—a barometer of global risk appetite—fell a further 0.4pc.
Despite Fed Chair Jerome Powell’s recent comments suggesting no urgency on interest rates, futures markets now price in almost five quarter-point cuts in 2025, with the first potentially arriving as soon as May.
“The only real circuit breaker is President Trump’s iPhone, and he is showing little sign that the market sell-off is bothering him enough to reconsider a policy stance he has believed in for decades,” remarked Sean Callow, a senior FX analyst at ITC Markets in Sydney.
With investors also anticipating higher consumer prices due to tariffs, the upcoming U.S. inflation data—expected to show a 0.3pc increase for March—could further complicate the Fed’s response. Rising input costs are also expected to pressure corporate profit margins ahead of the Q1 earnings season.
Analysts at Goldman Sachs forecast a muted earnings outlook, noting that “rising tariff rates will force many companies to either raise prices or accept lower profit margins,” which could result in negative revisions to profit forecasts.
Gold, typically a haven during periods of market stress, was not spared in the rout and eased 0.3pc to $3,026 per ounce. Analysts suggested that some investors may be liquidating positions across the board to meet margin calls or stem portfolio losses, potentially triggering a self-reinforcing cycle of selling.
As markets remain on edge, the coming weeks will be crucial in determining whether central banks intervene with monetary easing or whether the escalating U.S.-China trade dispute deepens into a prolonged economic standoff.
