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A sell-off in global stocks eased on Tuesday in the wake of steep falls on Wall Street fuelled by investor concerns over the impact of Donald Trump’s policies on the US economy.
Futures markets pointed to a small recovery in the US, with contracts tracking the S&P 500 and Nasdaq 100 up 0.3 per cent and 0.2 per cent respectively. In Europe, the Stoxx Europe 600 steadied, down just 0.1 per cent, while Germany’s Dax added 0.3 per cent.
Asian stocks, which opened sharply lower on Tuesday following the US sell-off, recovered some ground. Japan’s Topix and exporter oriented Nikkei 225 index finished 1.1 and 0.6 per cent lower respectively. South Korea’s Kospi dropped 1.1 per cent and Australia’s S&P/ASX 200 declined 0.9 per cent.
China’s CSI 300 advanced 0.3 per cent, while in Hong Kong the Hang Seng index ended the day flat. China’s offshore renminbi, which trades freely, strengthened by 0.3 per cent to 7.24 a dollar.
The shifts followed big moves on Wall Street where investors were unnerved by the rhetoric from senior US administration officials over the equity market falls. Trump said there would be a “period of transition” as the economy adjusted to a global trade war.
The Nasdaq Composite fell 4 per cent — its worst day in two and a half years — while the S&P 500 index tumbled 2.7 per cent over fears of the economic impact of Trump’s global trade war.
“US data still show an economy in decent shape, but investors are spooked by erratic policy messaging that is undermining consumption and investment,” said Guy Miller, chief market strategist at insurer Zurich.
“While growth is at risk and animal spirits are in hiding, US recession fears appear overdone.”
Technology and industrial companies led the falls in Asia, with Taiwan’s contract manufacturers TSMC and Foxconn down 2.7 per cent and 2 per cent. Korea’s Samsung Heavy Industries retreated 2.1 per cent and Tokyo Electron ended the day down 0.5 per cent.
“It will be a volatile market globally this year, with Trump and [presidential adviser Elon Musk’s] daily news hitting headlines,” said Thomas Fang, head of UBS China global markets.
Other analysts noted US tech stocks had rallied hard over the past year, leading some investors to take profit.
“The whole [US] tech sector has risen so much since last April, even with the correction now, it has still rallied a lot,” said Wee Khoon Chong, a senior markets strategist at BNY.
“People worry this is going to be a meltdown, but I don’t think so,” he added.
“When you have a new, better option, people adjust, valuations adjust,” Chong said.
Investors turned to US Treasuries on Tuesday, with yields on two-year and 10-year bonds falling 0.01 percentage points to 4.19 per cent and 0.02 percentage points to 3.87 per cent, respectively.
The US dollar fell 0.5 per cent against a basket of six trading partners and is down 4.6 per cent since the start of the year. The Japanese yen rallied before paring gains to ¥147.1 a dollar.
Oil rose, with Brent futures — the international benchmark — up 0.4 per cent at $69.54 per barrel. Prices fell 1.5 per cent on Monday during the US session amid rising uncertainty over global demand.
Gold rose 0.5 per cent to $2,904 per troy ounce.