Stocks in Asia slumped on Tuesday following heavy losses on Wall Street a day earlier, after US President Donald Trump declined to rule out the possibility of a recession as he wages a tariff war with some of America's biggest trade partners.
Asian shares fell to a five-week low as investors took defensive positions after the technology-heavy Nasdaq 100 recorded its worst trading day since 2022.
The mood in global stock markets remains jittery and investors on Wall Street, who were bullish after Mr Trump secured his second term in the White House, are now worried the government's push to impose tariffs and spending cuts will severely hamper growth.
However, Asian benchmarks managed to claw back some of the early losses later on Tuesday.
Japan's Topix was down 0.64 per cent, Australia's S&P/ASX 200 was 0.7 per cent lower, Hong Kong's Hang Seng was down 0.17, while India’s BSE SENSEX Index dipped 0.1 per cent as of 11.45am UAE time.
“Markets are flashing red as anxiety grows that the US economy could tip into recession as a result of the uncertain policies of the Trump administration,” said Edward Bell, acting group head of research and chief economist for Emirates NBD. "The S&P 500 has erased all of its post-election gains while European and Asian markets have likewise slumped.”
On Monday, the drop in stocks was especially brutal for the so-called Magnificent Seven stocks, which include Google parent Alphabet, Amazon, Meta and Nvidia.
At the close of the trade, the tech-focused Nasdaq Composite Index had lost 4 per cent, while the broad-based S&P 500 shed 2.7 per cent.
Tesla stocks also took a hammering, slumping about 15 per cent as a global backlash against Elon Musk's support of Mr Trump and far-right European political parties continues.
“There is a period of transition, because what we're doing is very big – we're bringing wealth back to America,” Mr Trump said when asked in a televised interview whether he expected a recession this year. He added that “it takes a little time”.
Emirates NBD
The possibility of short-term pain stands in stark contrast to Mr Trump's usual upbeat messages about the economy. During his first term, he bragged repeatedly about gains in the stock market, but he has been comparatively quiet on the topic since taking office on January 20.
While the mood is pensive in equities markets, investors are awaiting a clear direction from Washington on economic policy and tariffs. They will hope Mr Trump’s second presidency will not be a repeat of his first, when he triggered a global trade war that dented economic growth.
Equity-index futures for the S&P 500 gained as much as 0.1 per cent, while contracts for Nasdaq 100 rose as well.
Equity indexes in Hong Kong and mainland China also trimmed their declines. Yields on two-year Treasuries recovered after slumping to the lowest level since October and a gauge of the dollar slipped.
