Markets in Asia were always going to be on edge after the huge slide on Wall Street on Friday. Equities got a further shove lower as renewed tariff threats from Trump shook investor confidence and prompted a sharp reassessment of economic risks. Trump said he plans to launch his reciprocal tariff push against “all countries,” reinforcing expectations of a sweeping trade crackdown that could see levies of up to 20% imposed on nearly all U.S. trading partners. While the precise scope remains undecided (with two days to go still undecided ... hard to believe), administration insiders say the final policy will be “big and simple,” likely broader than earlier plans targeting just top trading partners.
Goldman Sachs responded by lifting its 12-month U.S. recession probability to 35%, up from 20% previously, citing higher inflation, higher unemployment, and associated growth-dampening risks of a broad-based tariff regime. The last time recession odds were this high was during the aggressive Fed tightening cycle in 2022 and the SVB-related turmoil of early 2023. We didn’t get recessions those times, fingers crossed the luck holds out.
In Asian data, Japan’s industrial production surged at its fastest pace in nearly a year as manufacturers rushed to fill orders ahead of expected U.S. tariff hikes. Meanwhile, China’s official PMI showed manufacturing activity accelerating to a 12-month high in March, buoyed by strong domestic demand and front-loaded export orders. Still, Capital Economics noted that overall growth momentum remains uneven, with continued softness in the services sector (despite the PMI expanding).
In other news from China, Nanjing, the capital of East China's Jiangsu Province, removed all home purchase restrictions.
In Australia, an uptick in (a private survey of) monthly inflation data reversed February’s softness, tempering market hopes that price pressures might soon fall comfortably back within the RBA’s target band. The data may prompt RBA policymakers to remain cautious about further easing. The Bank makes its interest rate decision Tuesday Australia time, with markets almost unanimously expecting an on hold decision.
Elsewhere, a new report from The Information revealed that some tech firms are beginning to scale back AI spending sharply, citing cost efficiencies from platforms like DeepSeek, adding a fresh wrinkle to the AI investment narrative.
In FX markets yen was a notable mover, with USD/JPY dropping under 149.00 again. Safe haven demand in the face of geopolitical stress alongside tariff chaos, and lower US yields contributing. Speaking of a safe haven, gold rocketed even higher, to a record high above US$3110.
EUR, GBP were both up a little while AUD and NZD are more or less flat.
Equities were hit:
Shenzen down more than 1%ChiNext down more than 1%Shanghai Composite down 0.6%Hong Kong’s Hang Seng -1.3%Japan’s Nikkei -4% (3.9 as I update to be more precise)US equity futures -0.7%USD/JPY:
This article was written by Eamonn Sheridan at www.forexlive.com. Read More Details
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