Hang Seng Index and Nikkei 225: Recession Fears Weigh on Risk Sentiment

US Markets Reverse as Recession Fears Resurface

US equity markets came under renewed selling pressure on Thursday, April 10, as investors considered the potential economic fallout of a US-China trade war. The Nasdaq Composite Index tumbled 4.31%, while the Dow and the S&P 500 dropped 5.53% and 5.46%, respectively.

Speculation about China planning countermeasures against Trump’s tariffs fueled fears of an extended US-China trade war. Concerns about tariffs driving inflation higher overshadowed softer US inflation data.

In the bond markets, 10-year US Treasury yields climbed for a fourth straight session, briefly touching a session high of 4.431 before settling at 4.425%.

Peter Schiff, Chief Economist and Global Strategist at Europac, commented:

“I’ve never seen such a mass selloff of U.S. assets. The U.S. dollar, bonds, and stocks are all getting killed. I can’t remember when the dollar lost 3.5% against the Swiss franc in one day. America’s ride on the global gravy train is about to come to a screeching halt. Buckle up.”

US Inflation Softens – Can Tariffs Derail Dovish Fed Bets?

On April 10, US inflation pointed to cooling price pressures. The annual inflation rate dropped to 2.4% in March, down from 2.8% in February, while core inflation eased below 3%, supporting a more dovish Fed rate path.

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, noted a slowdown in services inflation while suggesting a pullback in discretionary spending. While the soft print supports a Fed pause, he warned that tariffs could reignite inflation concerns.

Hang Seng Index Drops on Trade War Jitters

In Asia, the Hang Seng Index fell 0.41% on Friday morning as concerns about an escalation in the US-China trade war impacted risk assets.

Auto and tech stocks bore the brunt of the selloff.

• Tech giants Alibaba (09988.HK) and Baidu (09888.HK) fell 2.19% and 1.26%, respectively.
• NIO Inc. (09866.HK) declined by 0.57%.

Mainland China’s equity markets also edged lower, with the CSI 300 and Shanghai Composite Index falling 0.55% and 0.16%, respectively. However, the losses were modest as markets eye USD/CNY trends.

On Friday, the People’s Bank of China raised the CNY Central Parity Rate by five pips to 7.2087 per US dollar. Economists have noted Beijing’s reluctance to devalue the Yuan, raising hopes of meaningful US-China trade negotiations.

Robin Brooks, Senior Fellow at the Brookings Institute, commented:

“As long as China doesn’t devalue, there is hope, as this means China is still in negotiating mode with the US. In contrast, any material devaluation of the Yuan would signal a severe escalation of the trade war that is now the only thing that matters for markets. Only China matters.”

Nikkei 225 Tumbles as Recession Worries Deepen

The Nikkei 225 tumbled 4.66% on Friday morning, tracking overnight losses in the US markets. Recession fears triggered a sharp selloff in US bonds and the dollar as confidence in the US economy waned. Risk aversion drove demand for safe-haven assets, boosting demand for the Japanese Yen. USD/JPY fell 0.83% to 143.227 in the morning session.

A US recession and a stronger Yen could weigh on demand for Japanese goods and corporate earnings.

While the losses were broad-based, export-linked stocks led the losses. Sony Corp. (6758) plunged 9.38%, while Nissan Motor Corp. (7201) and Honda Motor Co. (7267) posted losses of 8.33% and 4.75%, respectively.

ASX 200 Tracks Wall Street Lower

Australia’s ASX 200 fell 1.26% on Friday morning, following the US markets into negative territory. Recession fears weighed on bank, energy, and mining stocks, though gold stocks rallied.

• Westpac Banking Corp. (WBC) dropped 2.19%.
• BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) fell 2.36% and 2.53%, respectively, as iron ore spot prices slid 1.52% in the morning session on a softer demand outlook.
• Woodside Energy Group Ltd. (WDS) dropped 3.19% on sliding oil prices, while Northern Star Resources Ltd. (NST) surged 4.54%. Gold prices reached a record high of $3.220 after rallying 2.99% on April 10.

Outlook: Trade Tariffs and Central Bank Signals in Focus

Looking ahead, markets will remain focused on US-China trade tensions. Any fiscal support from Beijing could cushion the blow to Chinese and Hong Kong equities. Central bank commentary will also be crucial as investors reassess the US recession risk. Explore actionable strategies to shield your portfolio from trade war volatility.

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