SYDNEY– Asian stocks dropped sharply on Monday as fears of a renewed US-China trade war unsettled investors already wary of stretched market valuations. However, Wall Street futures pointed to a recovery as risk appetite began to stabilize.
US President Donald Trump’s threat of 100% tariffs on Chinese goods rattled global sentiment, though he later struck a softer tone, saying the US did not want to “hurt” China. Beijing defended its rare earth export curbs, calling them a response to US “aggression,” but refrained from new tariffs.
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Markets remain on edge, with Japan’s political uncertainty adding to volatility. The Nikkei stayed closed for a holiday, but futures rebounded 1.5% after plunging 5% on Friday amid doubts over Sanae Takaichi’s potential ascension to prime minister.
Across Asia, South Korea’s KOSPI fell 1.3%, Australia’s ASX 200 lost 0.6%, and Chinese blue chips dropped 1.3%, though semiconductor and rare earth stocks firmed as exports surged 8.3%, nearly double expectations.
On Wall Street, S&P 500 futures gained 1.3% and Nasdaq futures jumped 1.8%, ahead of a busy earnings week featuring major banks like JPMorgan, Goldman Sachs, and Citigroup. Analysts expect a robust 8.8% rise in Q3 profits year-over-year.
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In Europe, political tensions lingered as French PM Sebastien Lecornu unveiled a new cabinet amid fiscal battles. EuroSTOXX 50 futures rose 0.4%, DAX 0.5%, and FTSE 0.1%.
Currencies steadied after a rush to safe havens. The dollar rose to 151.98 yen, the euro held at $1.1617, and the Swiss franc eased slightly.
Bond markets were muted due to US holidays, but investors still priced in a 98% chance of a Fed rate cut later this month, with another expected in December. Fed Chair Jerome Powell is set to speak Tuesday at the NABE meeting, offering clues on the outlook.
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Commodities rallied on safe-haven demand — gold hit a new record at $4,059 per ounce, while Brent crude climbed 1.6% to $63.74 a barrel amid cautious hopes of a US-China compromise.