EQUITIES extended their losses in Asia and Europe on Friday, continuing a global rout triggered by Donald Trump’s tariff blitz, which has intensified a trade war and heightened fears of recession and inflation.
The US president’s harsher-than-expected “Liberation Day” levies sent shockwaves through markets on Thursday, with Wall Street experiencing its worst day since the early days of the Covid-19 pandemic and the dollar plummeting against major peers.
As stocks were plummeting, the 78-year-old Republican asserted that they would “boom” as the economy recalibrates.
Trump said he wanted to make the United States free from reliance on foreign manufacturers, likening this massive economic reshaping to a medical procedure. He stated that it was what was expected, explaining that the economy had been very sick, had undergone an operation, and would become a booming economy.
White House Press Secretary Karoline Leavitt warned on CNN that the president had made it clear the previous day that this was not a negotiation. Trump later stated that he would negotiate as long as the other parties offered something beneficial.
Fears are growing that governments will retaliate, further harming global trade and battering the world economy. Some have already warned that they will act, while others have said they will take time to assess the impact of the measures.
China demanded that the tariffs be immediately cancelled and vowed countermeasures, while France and Germany warned that the European Union could target US tech firms. French President Emmanuel Macron called for suspending investment in the United States until the “brutal” new tariffs had been “clarified”.
Japanese Prime Minister Shigeru Ishiba said on Friday that the 24 per cent levies his country faced were a “national crisis”.
Jim Zelter, president of Apollo Global Management, warned that the chances of a US recession had risen to at least one in two. He added that the levies could put the Federal Reserve in a bind as it had to weigh hiking interest rates to fight a possible inflation spike or cutting them to support the economy.
Investors will be closely watching US jobs data due later on Friday for fresh insights into the state of the world’s top economy, while Fed boss Jerome Powell is also scheduled to give a speech.
Zelter told Bloomberg Television that if he had been speaking six months ago, he would have said a recession in 2025 or 2026 was one-in-five, but now it was certainly one-in-two, if not higher. Traders are now eyeing a 50 per cent chance that the Fed will cut rates four times this year.
Asian investors continued to offload shares amid concerns about the possibility of more market-negative headlines over the weekend.
Tokyo shed 2.8 per cent, with car giants taking the heat once more. Toyota lost more than four per cent, while Nissan and Honda each sank more than five per cent. Tech titan Sony and tech investor SoftBank were also sharply lower again.
Sydney tumbled more than two per cent, along with Singapore and Bangkok, while Seoul, Wellington, Mumbai, and Manila were deep in the red as well.
Hanoi, which plunged more than seven per cent on Thursday owing to the near 50 per cent tariff imposed on Vietnam, fell another 4.6 per cent.
London, Paris, and Frankfurt started on the back foot.
Hong Kong, Shanghai, Taipei, and Jakarta were closed for holidays.
The selling followed Wall Street’s tech-heavy Nasdaq Composite plunging six per cent, the S&P 500 shedding 4.8 per cent – its biggest dip in a day since 2020 – and the Dow falling four per cent.
The dollar remained under pressure across the board and was sitting at a six-month low against the yen, euro, and sterling.
Oil also extended losses, having tanked more than six per cent the previous day on fears about the impact of a possible recession on demand.
News that OPEC+ had unexpectedly hiked supply three times more than planned added to selling pressure on the commodity.
Jose Torres, senior economist at Interactive Brokers, said that the historic selling pressure in stock markets was not an overreaction, considering that recessions have generated significant drawdowns in equities in the past. He added that an economic downturn was now an even chance, with odds rising the longer these trade measures were maintained.
-BTS Media
