Asian stock markets fought to hold their footing on Tuesday after a furious flight from US assets undermined Wall Street and the dollar, while concerns about the independence of the Federal Reserve piled fresh pressure on Treasuries.
Relatively limited losses in Asia sparked talk that funds could be reallocating money to equities in the area, though the impact of tariffs on economic growth remained a major drag.
US President Donald Trump’s increasingly vocal attacks on Fed Chair Jerome Powell for not cutting interest rates saw Wall Street indexes shed around 2.5 per cent on Monday and the dollar hit three-year lows.
“The ‘sell America’ trade was in full flight,” said Tapas Strickland, head of market economics at NAB.
“Whether or not President Trump is legally able and willing to move against the Fed, the jousting underscores the loss of US exceptionalism and the very real policy risk for investors.”
The selling did abate somewhat in Asia, allowing S&P 500 futures to bounce 0.4 per cent and Nasdaq futures 0.5 per cent.
The market faces another test from earnings this week, with Tesla due later in the session, having already shed almost 6.0 per cent on Monday amid reports of production delays.
Also reporting this week are Alphabet and a host of high-profile industrials including Boeing, Northrop Grumman, Lockheed Martin and 3M.
The fallout from Wall Street saw Japan’s Nikkei ease a modest 0.3 per cent, while MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2 per cent. Chinese blue chips were holding steady for now.
European shares were less fortunate, with futures for the EUROSTOXX 50, FTSE and DAX all down around 0.7 per cent in choppy trading.
Yields on US 10-year notes stood at 4.40 per cent, having climbed on fears the White House could try and replace Powell with someone more inclined to cut rates, even as inflation was being lifted by Trump’s swingeing tariffs.
There was also the concern that the current Fed might now be more reluctant to ease policy in case that was perceived as giving into political pressure.
While White House talks on various trade deals are underway or about to start, a quick resolution seemed unlikely. Analysts at JPMorgan noted the average trade deal took 18 months to negotiate and 45 months to implement.
“We reiterate our view that if current policies do not change, then the probability of a US recession in 2025 is 90 per cent,” they said in a note.
The loss of confidence in US assets took a heavy toll on the dollar which touched its lowest since March 2022 against a basket of currencies at 97.923 on Monday.
The currency hit a decade-low on the Swiss franc at 0.8038 , while the euro briefly broke above $US1.1500 ($A1.7924), before steadying at $US1.1486 ($A1.7902).
The weakness in the dollar combined with demand for physical safe havens helped gold to another record above $US3,343 ($A5,210) an ounce .
Oil prices have been going the other way as worries about a global slowdown met the prospect of increased supply from OPEC.
There was a slight bounce on Tuesday as Brent rose 58 cents to $US66.82 ($A104.14) a barrel, while US crude added 51 cents to $US63.59 ($A99.11) per barrel.
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