Asian and European markets saw modest gains on Tuesday, recovering some of the significant losses from previous sessions. However, persistent uncertainty and sluggish investor sentiment lingered, with gold hitting another record high as President Donald Trump prepares to unveil sweeping tariffs.
Investors are positioning themselves for what Trump has dubbed “Liberation Day” on Wednesday, a day when he has warned of tariffs on “all countries” in retaliation for what he claims are years of unfair trade practices. While Trump promised to be “very kind” in his announcement, details on which countries or sectors will be targeted remain unclear, contributing to uncertainty and a broader sell-off in equities.
The mood was further soured by Trump’s threat last week to impose a 25% tariff on car and parts imports, stoking fears of a global trade war. Some market observers predict heightened volatility in the coming days, as governments could either accommodate the Republican president’s demands or retaliate with their own measures.
On Tuesday, Vietnam announced it would reduce duties on a range of goods, including cars, liquefied gas, and agricultural products, signaling a move to counterbalance growing trade tensions.
“Some on Wall Street are already speculating that the tariffs may not be as severe as feared, which could trigger a rally in risk assets,” said Jose Torres, senior economist at Interactive Brokers. “However, others remain concerned that the economy is too fragile to withstand such a stress test, particularly with rising challenges for households to maintain their expenditure patterns.”
Despite the tumultuous backdrop, equities staged a modest recovery. In Asia, Tokyo—heavily impacted by the sell-off in automotive giants like Toyota and Honda—saw a slight rebound. Other markets, including Hong Kong, Shanghai, Sydney, Seoul, Taipei, Bangkok, Singapore, and Wellington, also posted gains. Mumbai, however, recorded a decline.
In Europe, major indices including London’s FTSE 100, Paris’s CAC 40, and Frankfurt’s DAX 30 rose in early trading, reflecting a positive shift in sentiment.
However, the recovery was fragile. In the US, the S&P 500 had a modest gain on Monday but ended its worst quarter since 2022, reflecting broader market concerns. As risk aversion persists, investors have flocked to gold, driving the precious metal to an all-time high of $3,149.00, reflecting its status as a safe haven during periods of heightened uncertainty.
The VIX “fear index,” which measures market volatility, continued to rise, marking its fourth consecutive day of increases. “Markets, including Asian forex, appear to be underpricing the impact of Trump’s tariffs,” said Michael Wan of MUFG. “Our outlook suggests that Trump will take a more aggressive approach than many anticipate, potentially leading to a significant restructuring of the global order.”
Key Market Movements:
- Tokyo – Nikkei 225: Flat at 35,624.48
- Hong Kong – Hang Seng Index: Up 0.6% at 23,266.32
- Shanghai – Composite: Up 0.4% at 3,348.44
- London – FTSE 100: Up 0.9% at 8,661.53
- Euro/Dollar: Down at $1.0810 from $1.0817
- Pound/Dollar: Up at $1.2928 from $1.2916
- Dollar/Yen: Up at 149.99 yen from 149.94 yen
- West Texas Intermediate Crude: Up 0.3% at $71.72 per barrel
- Brent North Sea Crude: Up 0.3% at $75.00 per barrel
- New York – Dow Jones: Up 1.0% at 42,001.76
As global markets continue to navigate heightened trade tensions, the next moves by the US government and its international counterparts will be closely watched.