Asian stocks gain as Japan leads rebound on tariff talks

Asian stocks gained at the open after a volatile session in the US, snapping a global selloff from concerns President Donald Trump’s trade war will hurt economic growth. US equity-index futures rose in early trading.

Shares in Japan and Australia advanced along with equity-index futures for the S&P 500 and the Nasdaq 100, both gaining more than 1%. Contracts for Hong Kong pointed to losses after a gauge of US-listed Chinese shares fell more than 5% after Trump threatened to slap additional 50% tariffs on China. Treasuries yields and the dollar were steady early Tuesday.

Fears of an economic downturn led to sharp swings in US markets with the S&P 500 index nearing a bear market before finishing slightly down Monday as investors absorbed further tariff news. Trump, who signaled he could be open to some negotiations, said he wasn’t considering a pause on his plan to implement additional tariffs on dozens of countries despite outreach from trading partners eager to avoid the levies.

“For now, it looks like news out of Washington will continue to drive the market’s swings, one way or the other,” said Chris Larkin at E*Trade from Morgan Stanley. “Some of the market’s notable lows over the past few decades have been preceded by similar levels of volatility, although it’s always impossible to know when prices will eventually find their bottom.”

In the bond market, Treasuries fell Monday, erasing a portion of their biggest weekly advance since August. The yield on the 10-year rose 19 basis points as investors liquidated profitable trades to cover equity losses. Australian and New Zealand bonds tracked the moves.

Traders’ bets on how much the Federal Reserve will lower US interest rates this year have been fluctuating. At least three reductions are now reflected in overnight interest-rate swaps this year, with the first fully priced in for June.

Read more: Dollar Swap Spreads Plunge in Further Asset Liquidation Signal

In Asia, Chinese shares plunged on Monday while sovereign yields neared an all-time low as investors braced themselves for the fall-out from a spiraling trade conflict between the world’s two largest economies. China’s retaliation against Trump’s sweeping tariffs is forcing investors to confront the reality that a much-feared trade conflict has entered a new phase.

Meanwhile, Trump has assigned two members of his cabinet to kick off bilateral trade talks with Japan after a call with Prime Minister Shigeru Ishiba on Monday. Japan was slapped with a 24% across-the-board reciprocal tariff scheduled to begin Wednesday, in addition to a 25% auto duty.

Volatility

Traders looking for US equities to snap back after a selloff of trillions of dollars were faced with a series of twists and turns on Monday. The S&P 500’s bottom-to-top intraday reversal was the biggest since 2020 when Covid upended global trading, while the Cboe Volatility Index pushed away from the 60 mark hit earlier Monday.

As markets wobbled, some Wall Street titans sounded the alarm. Bill Ackman said the US is “heading for a self-induced, economic nuclear winter.” Boaz Weinstein predicted the “avalanche has really just started.” And Jamie Dimon said it “may be disastrous in the long run.”

“We should see a strong bounce at some point soon, but the process of repricing the market to its realistic economic outlook will take time,” said Matt Maley at Miller Tabak. “There will be plenty of time to get aggressive when it becomes more evident that the worst of the decline is behind us.”