(Bloomberg) — A global selloff in equities was set to continue from Asia into Europe, while the dollar strengthened and Treasury yields edged lower as investors shunned risky bets with President Donald Trump ratcheting up tariffs.
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Euro Stoxx 50 futures dropped more than 1%, while contracts for US stocks were steady. A benchmark of Asian shares dropped the most in almost a month after the S&P 500 slid 1.6% Thursday and erased its gains for the year. The Nasdaq 100 declined 2.8% while Nvidia Corp. shares slumped 8.5% after its latest earnings.
From Sydney to Mumbai, stock indexes slid amid concerns over Trump’s latest round of tariffs on Canada, Mexico and China will pan out and impact economic growth. Bitcoin, seen as a so-called Trump trade, plunged and a gauge of dollar strength edged up. Investors shunned riskier corners of the market, with technology shares in Hong Kong taking a hammering.
Trump said the 25% tariffs on Canada and Mexico would come into force from March 4, while Chinese imports would face a further 10% levy. Economists say tariffs may hurt US growth, worsen inflation and possibly spark recessions in Mexico and Canada. China vowed “all necessary measures” against the US moves.
The announcements “have prompted market participants to reassess their expectations of tariff risks,” said Jun Rong Yeap, market strategist at IG Asia Pte. “Whether this is still a negotiation tactic or a definite move remains up for debate, but markets are unwilling to take chances.”
Treasuries advanced Friday in Asian trading, extending gains for short-dated US government debt from the prior session. US 10-year yields dropped to around 4.23%, a level not seen since December.
Trump unveiling additional tariffs on Chinese imports raises the risk Beijing will ramp up its retaliation and a spiraling of tensions between the world’s two largest economies.
“If the US insists on having its own way, China will counter with all necessary measures to defend its legitimate rights and interests,” a spokesperson for the Chinese Ministry of Commerce said Friday.
The additional 10% tariff on China “is frustrating because it keeps uncertainty alive and reinforces the risk that this becomes a pattern,” said Billy Leung, an investment strategist at Global X ETFs. “Markets were already fatigued and tired by tariff talk, and now investors are being forced to reassess.”
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While tariffs introduce near-term risks, they don’t significantly alter the current narrative around Chinese markets, which have been supported by enthusiasm over artificial intelligence, said Charu Chanana, chief investment strategist at Saxo Markets. Focus will now be on the National People’s Congress meeting next week, which will play a crucial role in sustaining the current momentum in China, she said.
Chinese shares in Hong Kong fell more than 3% Friday while a gauge of technology stocks dropped 5%.
“The combination of heightened tariff risks and a stronger dollar could be a near-term headwind, but there could be an offset from expectations that tariffs could be a negotiating tool, and China’s administration has the stimulus tools to respond,” Chanana said.
In Indonesia, the rupiah dropped to its lowest level since April 2020 as Trump’s tariff threats reverberated across Asian currencies. The country’s main stock index fell Friday, extending a slump from a September high to 20%.
PCE Inflation
The Fed’s preferred inflation metric is due later Friday and is expected to cool to the slowest pace since June. The core personal consumption expenditures price index — which excludes often-volatile food and energy costs — probably rose 2.6% in the year through January. Overall PCE inflation likely eased on an annual basis as well, according to the median estimate in a Bloomberg survey of economists.
In other commodities, oil headed for a monthly loss and gold was set for its first weekly decline of the year.
Key events this week:
US PCE inflation, income and spending, Friday
Fed’s Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 6:53 a.m. London time
Nasdaq 100 futures were little changed
The MSCI Asia Pacific Index fell 2.4%
The MSCI Emerging Markets Index fell 2.2%
S&P/ASX 200 futures fell 1.4%
Hong Kong’s Hang Seng fell 3.5%
The Shanghai Composite fell 2%
Euro Stoxx 50 futures fell 1.2%
Currencies
The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.1% to $1.0386
The Japanese yen fell 0.2% to 150.10 per dollar
The offshore yuan was little changed at 7.2949 per dollar
The British pound fell 0.2% to $1.2579
Cryptocurrencies
Bitcoin fell 6.2% to $79,064.43
Ether fell 8.4% to $2,088.33
Bonds
The yield on 10-year Treasuries declined three basis points to 4.23%
Germany’s 10-year yield declined two basis points to 2.41%
Britain’s 10-year yield advanced one basis point to 4.51%
Japan’s 10-year yield declined three basis points to 1.370%
Australia’s 10-year yield declined four basis points to 4.29%
Commodities
Spot gold fell 0.5% to $2,863.86 an ounce
West Texas Intermediate crude fell 0.7% to $69.86 a barrel
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu and Richard Henderson.
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