It is once again risk off in markets as the pain from last week carries over to Asia today. And to call it that is an understatement as it has been a bloodbath on the streets right from the get go. Here’s a look at how equities are faring in the region before we move over to Europe:
- Nikkei -6.8%
- Shanghai Composite -6.3%
- CSI 300 -6.3%
- Hang Seng -10.7%
- Taeix -9.7% (only because of 10% limit)
- STI -8.1%
What an absolute mauling. A fun fact though is that despite the double-digit fall, the Hang Seng is still up 1.5% on the year.
In any case, we are starting to see CDS indices jump up and that speaks to the rout spreading over to credit stress. We already got a taste of that with investors liquidating positions before the weekend last week. For today though, there’s still flows back into Treasuries with 10-year yields down nearly 7 bps to 3.926% currently.
But just be wary that with credit markets also starting to jump out of the page, we could see more forced selling in the meantime.
All that being said, we are riding on peak fear in broader markets at the moment. And when that typically comes through in Asia, there’s more time for investors to filter that out and gather some composure before US trading.
If there are a couple of positive tariff headlines in terms of negotiations and what not, that could help to turn sentiment around later in the day. It’s not to say it will be enough to drive a wild rally on the other end but it could perhaps ease some fears and not repeat a bloodbath in Wall Street.
There’s also still time for talks and some exemptions/exclusions to be made. Trump’s tariffs will go into effect on 9 April but we might see scope for changes in the next week if negotiations move along in the coming days.
So if we take a step back, there is some scenario in which things might get better or at least turn out not so bad. We’ll just have to see if that will play out or not.
But for now though, it’s all fear and hysteria in markets. Everyone is afraid of the uncertainty that Trump’s tariffs will be bringing as recession fears are running high.
Unless there are changes to tariffs in the day(s) ahead, the selling will stop when it stops
