* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Nasdaq futures drop 1.0%, Nikkei dives 3.6%
* Trump says US tariffs to cover all countries
* Flight to safety buoys bonds, gold hits record
SYDNEY, March 31 (Reuters) – World share markets were
in a tailspin on Monday after U.S. President Donald Trump said
tariffs would essentially cover all countries, stoking worries a
global trade war could lead to recession.
Trump’s comments to reporters on Air Force One seemed to
dash hopes the levies would be more limited. Trump is due to
receive tariff recommendations on Tuesday and announce initial
levels on Wednesday, followed by auto tariffs the day after.
Seeking any safe harbour from the trade storm, investors
piled into sovereign bonds and the Japanese yen, while lifting
gold prices to another all-time high.
“For the first time in years, we find ourselves genuinely
worried about risk assets,” said Ajay Rajadhyaksha, head of
rates markets at Barclays.
“If policy chaos and trade wars worsen much further, a
recession is now a realistic risk across major economies,” he
added. “For the first time in many quarters, we favour core
fixed income over global equities.”
Japan’s Nikkei led the rout in Asia, sinking 3.6% to
a six-month low as automaker stocks continued to suffer fallout
from Trump’s talk of 25% tariffs on imported cars.
MSCI’s broadest index of Asia-Pacific shares outside Japan
shed 1.2% and South Korea 2.5%.
Chinese blue chips dipped 0.3% as a survey showed
manufacturing activity inched higher in March, much as analysts
expected.
EUROSTOXX 50 futures fell 0.6%, while FTSE futures
and DAX futures were both down 0.4%.
The European Union was ready to respond with tariffs of its
own, German Chancellor Olaf Scholz said on Sunday, but there
were also reports the block was preparing a list of concessions
to offer to Trump.
S&P 500 futures lost 0.6%, extending Friday’s rout,
while Nasdaq futures shed 1.0%.
THAT “R” WORD
Many economists are worried that tariffs will hit the U.S.
economy hard, even while limiting the Federal Reserve’s scope to
cut rates by also lifting inflation in the short term.
“Recession risks have become elevated – to a 40% probability
– on concerns that aggressive U.S. policies hit business and
household sentiment,” warned Bruce Kasman, chief economist at
JPMorgan.
“With the latest tariff increases set to push U.S. core
inflation above 4% next quarter, a household sector with a
healthy balance will need to show a willingness to lower its
saving rate to cushion this blow.”
Analysts at Goldman Sachs now saw a 35% chance of a U.S.
recession, up from 20% previously, saying they expected Trump to
announce reciprocal tariffs that average 15% across all U.S.
trading partners on April 2.
Data out on Friday underlined the risks as a key measure of
core inflation rose by more than expected in February while
consumer spending disappointed.
That raised the stakes for the March payrolls report due on
Friday where any outcome below the 140,000 gain expected would
only add to recession fears. Also due are a rush of surveys on
factories and services, along with figures on trade and job
openings.
Bond investors seemed to be betting the slowdown in U.S.
economic growth will outweigh a temporary lift in inflation and
prompt the Fed to cut rates by around 70 basis points this year.
This, combined with a flight from risk assets, saw 10-year
Treasury yields drop to 4.208% while two-year yields
hit 3.861%.
The outlook for rates could become clearer when Fed Chair
Jerome Powell speaks on Friday, following a host of other Fed
speakers this week.
The drop in yields saw the dollar ease 0.4% to 149.14 yen
, while the euro edged up to $1.0842. The
dollar index held at 103.880, having slipped for the
previous two sessions.
The perceived safety of gold saw the metal hit another
all-time high at $3,097 an ounce.
The risk of slower global growth was making itself felt on
oil prices, offsetting comments from Trump that he would impose
secondary tariffs of 25% to 50% on all Russian oil if he feels
Moscow is blocking his efforts to end the war in Ukraine.
Brent slipped 45 cents to $73.18 a barrel, while
U.S. crude dropped 35 cents to $69.00 per barrel.
(Editing by Shri Navaratnam and Lincoln Feast.)
