Markets hit by US recession fears
Economic fears have sparked a renewed sell-off in stocks, with US tech giants diving after President Donald Trump declined to rule out a recession.
Global markets have been hit by US recession fears, with technology giants tumbling after US President Donald Trump declined to rule out a recession.
Adding to woes was investment bank Goldman Sachs cutting its outlook for the US economy, with HSBC downgrading its rating on US stocks.
On Wall Street, the Dow Jones Industrial Average plunged 2.1 per cent to 41,911.71 points and the S&P 500 fell 2.7 per cent to 5614.56 points, its lowest since September. The Nasdaq Composite dived 4 per cent to 17,468.32 points, marking its biggest one-day fall since September 2022.
Australia’s S&P/ASX 200 index dived 1.2 per cent to a seven-month low of 7868.4 points in early trading on Tuesday.
Markets in Japan and Hong Kong were facing steeper falls of around 1.8 per cent.
US stock index futures were pointing to another rough session on Wall Street ahead. S&P 500 futures fell 0.5 per cent and Nasdaq 100 futures were down 0.9 per cent in early Asia Pacific trade.
“Risk aversion is the play here, and for the most part, we saw a classic day of de-grossing portfolio risk, shorting lower-quality assets and seeking protection through Treasuries, and options volatility,” said Chris Weston, head of research at Pepperstone.
“A late session rally in US equity futures was a small win for the remaining bulls, but given the extent of the one-way flow through US equity cash trade, the turn was hardly convincing and may just offer the sellers exit liquidity,” he said.
“Some will also point to the fact that 30 per cent of S&P 500 stocks closed higher, so there were some pockets of life in the equity market, and it wasn’t an all-out blanket liquidation of equity – but this may be a case of trying too hard to find the positives in a troubled market.”
It came as Mr Trump appeared determined to press on with his aggressive trade policy, despite the increasing risk of an economic downturn as tariffs lift prices and potentially delay interest rate cuts.
Asked in a Fox News interview on Sunday about the chance of a recession, Mr Trump said: “I hate to predict things like that… There is a period of transition, because what we’re doing is very big…”
Mr Trump appeared to echoing US Treasury Scott Bessent’s comments over the weekend from that the US could enter a “detox period” and downplay his sensitivity to the US stock market.
“Look, what I have to do is build a strong country. You can’t really watch the stock market.
“If you look at China, they have a 100-year perspective,” he said.
In an address to Congress last week, Trump said tariffs would only cause “a little disturbance.”
Bloomberg’s economist survey of the chance of a US recession occurring in the next 12 months rose from 20 per cent to 25 per cent last month as the US started to increase its tariffs on China.
Underscoring fears that tariffs will have a negative impact on the US economy, Goldman Sachs slashed its 2025 growth forecast to a below-consensus 1.7 per cent and increased its inflation forecast “both on the back of more adverse tariff assumptions’, chief economist Jan Hatzius said.
HSBC strategists upgraded European stocks to Overweight as they expected Eurozone fiscal stimulus to be “a potential game changer”. However, they cut US stocks to Neutral.
“It is important to stress that we are not turning negative on US equities – but tactically, we see better opportunities elsewhere for now,” the strategists wrote in a report.
“Slightly softer growth could be a net positive for equities if it forces the market to price in a more accommodative Fed and lower bond yields.”
China’s latest retaliatory tariffs on US agricultural products took effect on Monday.
US tariffs of 25 per cent tariffs on steel and aluminium were due to start on Wednesday.
US “reciprocal tariffs” on other regions, including the European Union were due to start on April 2.
US tech giants suffered outsized falls with Nvidia down 5.1 per cent, Tesla down 15 per cent and other “Magnificent 7” stocks including Apple, Alphabet and Meta down 4.4-4.9 per cent.
Volatility continued to spike with the VIX index up 4.5 percentage points to a three-month high of 27.86 per cent as the Nasdaq fell further into “correction” territory, 13.4 per cent below its December peak. The S&P 500 was 8.6 per cent below its record closing high of 6144.5 last month.
The sell-off in stocks sparked a “flight to safety” in government bonds and currencies. The 10-year US Treasury yield fell 8.8 basis points to 4.21 per cent and the US dollar yen rate fell 0.5 per cent to a five-month low of JPY147.27. However, spot gold fell 0.7 per cent to $US2,888.71 per ounce.
“Whether we’re closer to a point where much of the forced selling is reaching an endpoint is a debate on the floors, but aside from the ‘unconvincing’ 1 per cent late session bounce, the intraday tape of Nasdaq 100 or S&P 500 futures certainly doesn’t offer the sort of conviction to really believe we’re nearing a capitulation point,” said Pepperstone’s Mr Weston.
Originally published as Markets hit by US recession fears
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