Markets Overview
- ASX SPI 200 futures down 1.8% to 7,395.00
- Dow Average down 0.8% to 37,645.59
- Aussie down 0.4% to 0.5958 per US$
- US 10-year yield rose 10.7bps to 4.2910%
- Australia 3-year bond yield rose 6.9 bps to 3.34%
- Australia 10-year bond yield rose 14 bps to 4.24%
- Gold spot little changed at $2,982.58
- Brent futures down 4.2% to $61.53/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$1 Billion 2.75% 2028 Bonds
US stock futures slumped and Asian traders were bracing for sharp moves lower as the White House vowed to push ahead with sweeping tariffs on trading partners including a 104% levy on China.
S&P 500 futures fell more than 1% in early trading, and contracts indicate hefty drops in Sydney, Tokyo and Hong Kong. Wall Street was again lashed by wild swings on Tuesday amid back-and-forth trade threats between the US and China, with the S&P 500 closing down 1.6% — leaving it on the brink of a bear market. The US benchmark had earlier in the session rallied the most since 2022.
Oil fell more than 2% in early trading on Wednesday, after closing below $60 a barrel for the first time since 2021 in the previous session.
A White House official said the US is moving forward with levies on China as high as 104%, set to take effect after midnight New York time, as Premier Li Qiang said his country has ample policy tools to “fully offset” negative external shocks. Long-term Treasury yields soared after a lackluster US sale of notes highlighted cracks in the haven status of government debt.
Tuesday’s slide extended the S&P 500’s drop since the president detailed worldwide levies last Wednesday to more than 12% and at one point pushed the gauge down 20% since its record close in February, though stocks bounced back at that level. It was also another day of nearly unprecedented volume on US equity markets, with more than 23 billion shares changing hands.
“The volatility reflects the new situation in which no one knows what the rules of road are, or even what the desired destination is,” said Que Nguyen at Research Affiliates LLC. “Until investors reset expectations or those rules and goals are better understood, markets will continue these wild swings between hope and fear.”
Across world markets, investors have been gripped by concerns that something may break in the financial plumbing amid the cross-asset volatility, spurring speculation the Federal Reserve may need to speed up rate cuts to prevent a recession even with inflation jitters running rampant.
“The fundamental reason for the drawdown has been policy uncertainty – it’s functionally impossible to put in a bottom until that fundamental reason has been resolved, or at least until there is directional clarity on it,” said Scott Ladner at Horizon Investments.
Even gold, a traditional haven, erased an earlier advance as investors sought to cover positions in other assets, while industrial bellwether copper slipped for a fourth session. In currencies, the yen outperformed peers while the offshore yuan hit a fresh all-time low late in the session in New York.
Shares in Asia rebounded on Tuesday after posting a historic loss in the prior session. Japan led gains on expectations that it will get priority in US trade talks.
Trump is pushing ahead with higher duties on roughly 60 trading partners that he dubbed the “worst offenders.” He spent the final hours before his sweeping tariffs were set for full implementation lining up talks with key US allies, but hopes for a last-minute agreement with China appeared distant.
As foreign nations appeal to Washington for negotiations, Treasury Secretary Scott Bessent said there’s the potential for advantageous trade deals. Japan looks set to get priority in US tariff talks while Trump said prospects for a deal with South Korea were “looking good.”
Meantime, warnings from Wall Street strategists keep piling up on the dour outlook for stocks.
BlackRock Inc. strategists Jean Boivin and Wei Li downgraded US equities on Monday to neutral from overweight on a three-month horizon, saying they expect “more pressure on risk assets in the near term given the major escalation in global trade tensions.”
And a strategy team at Goldman Sachs Group Inc., including Peter Oppenheimer and Lilia Peytavin, said the equity selloff could well turn into a longer-lasting cyclical bear market as recession risks mount.
