Asian markets experienced a sharp decline on Friday, driven by concerning signals from U.S. corporate earnings reports and a series of central bank pronouncements that introduced more ambiguity into the global economic outlook.
Hong Kong’s stock market was particularly hard-hit, with technology shares suffering significant losses. A key index tracking Chinese technology firms listed in Hong Kong saw a decline exceeding 3%, reversing some of its recent gains. A broader measure of Chinese equities in Hong Kong was on track for its worst two-day performance of the year. Indonesian and Taiwanese stocks also registered losses, contrasting with a slight uptick in Japanese equities. U.S. equity futures indicated a minor decline.
Investors across Asia are grappling with a darkening forecast for the world economy, with anxieties over trade disputes and the impact on company profits dampening market confidence. U.S. President Donald Trump’s announcement of both general reciprocal tariffs and additional sector-specific levies, effective April 2nd, represents a substantial threat to global economic stability.
“President Trump’s trade policies have unleashed a level of uncertainty in the markets unlike anything we’ve observed in recent years,” commented Todd Jablonski, Principal Asset Management’s global head of multi-asset and quantitative investments, during a Bloomberg Television interview. He added that his firm had reduced risk exposure in its multi-asset portfolios.
FedEx Corp., often viewed as a proxy for global economic health, saw its shares plummet after the company lowered its profit forecast, citing increased expenses and indications of slowing demand. Similarly, Nike Inc. pointed to tariffs and geopolitical tensions as headwinds that would negatively affect its financial results.
Market participants are now bracing for a series of earnings releases from major Chinese corporations, including tech giants Xiaomi Corp., Tencent Holdings Ltd., and e-commerce leader Meituan. While U.S.-listed PDD Holdings Inc. saw its shares climb after reporting better-than-expected earnings, the company also cautioned about the challenges posed by rising global uncertainty.
Conflicting Central Bank Messages
Despite a series of policy meetings this week by the Federal Reserve, the Bank of Japan, and the Bank of England, investors found little clarity on the economic trajectory. Instead, these central banks highlighted trade disputes as a factor clouding the outlook, reinforcing the perception that the global economy is navigating a period of considerable uncertainty leading up to April 2nd.
The European Union has postponed a planned tariff on American whiskey, signaling a willingness to negotiate with the Trump administration before implementing further retaliatory measures, according to Ireland’s deputy prime minister.
U.S. Treasury yields remained relatively stable on Friday, while a dollar index showed a modest increase. The Japanese yen depreciated following a report of slowing consumer inflation. The British pound extended its losses after the Bank of England opted to keep interest rates unchanged.
The weakness in U.S. markets also precedes a significant event on Friday: the expiration of $4.5 trillion in options contracts, a phenomenon known as “triple witching,” which historically tends to amplify market fluctuations.
“We can expect continued market oscillations as long as policy uncertainty persists,” stated Michael Rosen, chief investment officer at Angeles Investments, during an interview at Bloomberg’s New York headquarters. “Investor sentiment is likely to remain highly volatile, and this will be evident in market movements.”
Indonesia’s primary stock index initially dropped by as much as 2.6% but later recovered some of its losses. Growing concerns about the direction of President Prabowo Subianto’s policies have unsettled investors in the country, contributing to a sharp decline earlier in the week.