Asian stocks slide as market selloff deepens on US growth worries

SINGAPORE: Asian stocks took their cue from the Wall Street and fell sharply on Tuesday as worries mounted that a wide-ranging trade war could dent U.S. economic growth and result in a recession, leading 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 U.S. recession.

Those comments and worries sapped risk sentiment, sending stocks sliding and weighing on the U.S. dollar and Treasury yields.

The S&P 500 fell 2.7% on Monday, its biggest one-day drop this year, while the Nasdaq slid 4.0%, its biggest single-day percentage drop since September 2022. S&P and Nasdaq futures slid 1% in Asian hours on Tuesday.

In Asia, it was a sea of red with Japan’s Nikkei and Taiwan stocks sliding about 3%, hitting their lowest level since September. MSCI’s broadest index of Asia-Pacific shares outside Japan fell more than 1%.

Even Chinese stocks, which have been on a tear this year, were not immune to the downbeat mood.

The blue-chip index fell about 1%, while Hong Kong’s Hang Seng Index was 1.5% lower.

European futures also pointed to a lower open, with DAX futures down 0.8% and Eurostoxx futures 0.9% lower, suggesting the selloff had more room to go.

Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities, said the consensus 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.”

The yield on benchmark U.S. 10-year notes fell 5 basis points in Asian hours on Tuesday after dropping 10 bps in the previous session, the largest daily drop in almost a month.

The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 5 bps to a five-month low.

Traders are now pricing in 88 bps of easing from the Fed this year, compared to 75 bps on Monday, LSEG data showed.

Stocks fall, yen gains on Trump trade war, China deflationary woes

Safe havens were in demand, with the Japanese yen rising 0.3% against the dollar.

It was last at 146.65 per dollar after touching its highest level in five months earlier in the session. The yen is up 7% against the dollar in 2025.

The Swiss franc also strengthened and was hovering near three-month high touched on Monday. It last bought 0.87755 per dollar in early trading.

“Market sentiment has rapidly shifted from post-election optimism to serious concerns about recession, fuelled by ongoing policy uncertainty and a rolling stream of soft economic data,” said Tony Sycamore, market analyst at IG.

“Throwing fuel on the tariff bonfire already burning with serious intensity, Trump warned that reciprocal tariffs on Canadian dairy and lumber could be imminent.”

The dollar index , which measures the U.S. currency against six other units, was huddled near a four-month low.

The index has dropped over 4% so far this year.

In commodities, oil prices fell for a second day on Tuesday on worries that U.S. tariffs would slow economies around the world and hurt energy demand while OPEC+ ramps up its supply.

Brent futures fell 0.65% to $68.83 a barrel, while U.S. West Texas Intermediate crude futures lost 0.82% to $65.49 a barrel.