Market Analysis

Markets in Chaos: Trump's Tariffs Send Shares Lower, Dollar Sinks

Amos Simanungkalit · 04 Apr116.2K Views

Image Credit: Reuters

Stocks struggled to finish the week on Friday, with the U.S. dollar poised for its worst performance in a month, while gold approached record highs as fears grew that President Trump's sweeping tariffs could push the global economy into a recession.

Asian shares continued to battle heavy losses from the prior session, with Japan's Nikkei dropping 1.85%, extending a 2.8% slide from Thursday. MSCI's broad index for Asia-Pacific shares outside Japan fell 0.26%, amid thin trading, as markets in China, Hong Kong, and Taiwan were closed for a holiday.

U.S. stocks took a severe hit overnight, with the S&P 500 losing a combined $2.4 trillion in value, its biggest one-day loss since the March 2020 market crash triggered by the pandemic. Other U.S. indexes also saw sharp declines. This massive sell-off followed Trump’s announcement on Wednesday of the steepest trade tariffs in over a century, prompting investors to seek safe-haven assets.

David Bahnsen, chief investment officer at The Bahnsen Group, noted that if the current tariffs remain in place, a recession in Q2 or Q3 and a bear market are highly possible. He speculated that Trump might seek to alter his approach if the stock market enters a bear phase, potentially focusing on companies making significant investments in the U.S., but the effect on market sentiment remains uncertain.

U.S. stock futures showed some stabilization in the early Asian session, with Nasdaq futures rising 0.05%, while S&P 500 futures dipped 0.06%.

As concerns over a global recession, especially in the U.S., heightened, traders adjusted their expectations for Federal Reserve rate cuts. Fed funds futures now predict roughly 96 basis points of cuts by December, up from about 70 basis points before Trump’s tariff announcement. Macquarie Group's David Doyle warned that central banks might struggle to address stagflation, as slower growth and rising inflation would put conflicting pressures on policy.

Investors are awaiting comments from Fed Chair Jerome Powell, who is set to speak later on Friday, for any insights on the U.S. economy and potential policy actions following the latest tariff developments.

In the forex market, the dollar gained 0.09% against the yen, reaching 146.23, after a 2.2% drop the previous day, marking its steepest decline in over two years. The euro held steady at $1.1043 following a 1.9% jump on Thursday, while the Swiss franc rose to 0.8591 per dollar after a 2.6% surge.

The U.S. dollar remained near a six-month low at 102.04 against a basket of currencies. Jane Foley, senior FX strategist at Rabobank, attributed much of the dollar's weakness to the buildup of long positions at the end of last year and growing concerns over U.S. growth risks due to tariff talks.

Safe-haven currencies like the yen and Swiss franc benefited from investors fleeing to safety assets, while bond prices surged. The benchmark 10-year U.S. Treasury yield remained relatively unchanged at 4.0436%, having fallen 14 basis points the previous day.

Gold, a traditional safe-haven asset, was near a record high of $3,112.81 an ounce and set for its fifth consecutive weekly gain, as fears of the economic fallout from Trump’s tariffs boosted its appeal.

Oil prices continued their steep decline from the prior session, with Brent crude falling 0.13% to $70.05 per barrel, and U.S. West Texas Intermediate crude down 0.15% at $66.85 per barrel.