Asian Markets Plunge 6% Amid Trade War Fears & Oil Dips

Asian stock markets plummeted this Monday April 7, signalling further descent for Wall Street, as panic swept across global financial arenas in response to President Trump’s aggressive tariff measures and China’s retaliatory responses. Oil prices have plunged by 3%, reaching levels not witnessed in four long years.

From Tokyo to Sydney and Hong Kong, a catastrophic wave engulfed the markets.

At approximately 03:00 GMT, Tokyo’s flagship Nikkei index had already suffered a staggering 6.47% decline, settling at 31,591 points after an alarming dip of 8% just an hour prior.

The broader Topix index followed suit, dropping 6.5%. In Seoul, the Kospi index lost 4.3%, while Sydney’s market fell by 3.7%, itself reflecting a near 6% nosedive earlier in the day. Taiwan felt the brunt, losing around 10% of its value.

Chinese markets, which had been closed on Friday for a public holiday, opened to catastrophe as well: the Hang Seng index in Hong Kong plummeted by 9.5% to 20,780 points, while the composite Shanghai index faltered by 5.71%, with Shenzhen suffering a 7.83% drop.

The chaos erupted following the imposition of an initial wave of 10% tariffs that came into effect on Saturday, with further escalations set to be applied from Wednesday, impacting numerous countries including China (with tariffs soaring to 34%), Japan (24%), South Korea (25%), and Vietnam (46%).

Investor sentiment remains deeply unsettled, apprehensive of the detrimental economic consequences this protectionist assault heralds and foreseeing an ominous escalation.

“The trade war is broader and more widespread than during Trump’s first term,” warned Lloyd Chan, an analyst at MUFG.

He cautioned, “The risk of a large-scale global trade war is increasing. The negative impact and uncertainty will weigh heavily on the global economy by curtailing trade and investment.”

With Beijing’s latest announcement, Stephen Innes of SPI Asset Management commented, “It is clear that we are witnessing a brutal economic war.

This extends beyond mere trade conflict; it signifies a systematic overhaul of the global economic order, with rules being dismantled in real-time.

If last week was just a prelude, we are staring down the barrel of a potential bloodbath in the markets.”

There is growing speculation that Beijing may allow the yuan to depreciate to bolster its exporters.

However, Innes warned that this would invite increased currency volatility and could trigger capital outflows from China.

Tech Sector Hits Hard, Alibaba Collapses

Technology stocks have been particularly hard-hit, with semiconductor firms in Tokyo suffering under the weight of potential disruptions to electronic production chains across Asia.

Notable losses included Advantest, which fell sharply by 9.44%, and Sumco, down by a staggering 14.38%.

In Hong Kong, e-commerce giant Alibaba saw its shares plummet by 12% following the end of customs exemptions for small parcels shipped to the United States, while its rival JD.com dropped by 11%.

Apple suppliers and subcontractors, like Taiwanese Foxconn, also faced substantial losses, falling by 10%.

Wall Street Braces for Further Declines

Futures contracts for the Dow Jones and the broader S&P 500 indicate a grim outlook, with last week’s declines likely to extend.

Over the course of Thursday and Friday alone, the Dow Jones crashed by 9.26% while the S&P 500 saw an alarming 10.52% reduction, wiping out approximately $6 trillion in market capitalisation.

“This is a self-inflicted debacle courtesy of Trump. The rationale for short-term pain for the markets is fundamentally flawed,” remarked analyst Dan Ives of Wedbush Securities.

“Thus far, Trump’s team shows no signs of retreat… It is evident that Washington is using market turmoil as leverage, rather than a signal to change course,” echoed Stephen Innes.

Oil Prices Dwindle to 2021 Lows

As the chaos unfolded, by 03:00 GMT, a barrel of American oil (WTI) sank by 2.40% to $60.49, briefly falling below $60 for the first time since April 2021, having lost more than 16% since last Wednesday.

Meanwhile, North Sea Brent crude saw a similar decline of 2.47%, trading at $63.96.

“Market morale has collapsed in the face of growing fears that the trade war might usher in a global recession and a slowdown in oil demand,” observed UBS analyst Giovanni Staunovo.

In a concerning development, OPEC+ producers announced the cancellation of their planned production cuts for May, further exacerbating market fears.

Flight to Safety: Yen and Government Bonds in Demand

In a clear sign of heightened risk aversion, the yields on 10-year US and Japanese government bonds have slipped, reflecting surging demand.

The yen, regarded as a safe-haven asset, climbed by 0.3% against a weakening greenback, now standing at 146.48 yen to the dollar.

Gold, the ultimate safe haven, steadied at $3,025 an ounce, down 0.4% but still hovering near the peaks reached last Thursday.

As the tumult continues, the world watches with bated breath—uncertainties loom, and the economic landscape remains precariously balanced on the precipice of a potential crisis.

Source: Defi Media