The global stock market selloff deepened on Tuesday, with U.S. equity futures hitting new lows as mounting concerns about tariffs and government spending cuts in the United States weigh on economic growth. The pessimistic outlook has spread across global markets, driving a decline in stocks, a slump in cryptocurrencies, and a rally in bonds.
Asian markets experienced their third consecutive day of losses, following a particularly sharp drop in U.S. stocks on Monday. The Nasdaq 100 recorded its worst day since 2022, while Australian stocks reached a seven-month low, and the Nikkei-225 Index dropped to its lowest point since September. U.S. and European equity-index futures continued their descent in Asian trading, reflecting Wall Street’s diminishing optimism. Meanwhile, yields on 2-year Treasuries fell to their lowest since October, and a measure of the dollar weakened.
Market sentiment is turning increasingly negative, as investors fear that U.S. economic growth could stall. This shift in outlook follows President Donald Trump’s aggressive trade policies, including tariffs, and his continued push for government spending cuts, which have sparked concerns about an impending recession. This stark reversal marks a dramatic change in investor sentiment, as only two months ago, Trump’s presidency was largely seen as a boon for financial markets, fueling bullish momentum in stocks, Bitcoin, and the dollar.
Gina Bolvin, president of Bolvin Wealth Management Group, highlighted the stark shift in mood: “We’ve gone from animal spirits to what are the odds of a recession,” she said. “This is a headline-driven market; one that could change in an hour. Sit tight. Buckle up. We finally have the correction we were waiting for, and long-term investors will be rewarded again.”
Citigroup strategists downgraded U.S. stocks to neutral while upgrading Chinese equities to overweight, arguing that U.S. market exceptionalism may be on pause. Meanwhile, HSBC analysts raised their rating on European stocks, excluding the U.K., to overweight, anticipating that fiscal stimulus in the eurozone could have a positive impact.
Despite the global risk-off mood, investors in mainland China continued to buy Hong Kong stocks at record levels on Monday, spurred by a tech-driven rally in the region. Stocks have surged in 2025, with the rise of DeepSeek, an artificial intelligence startup, being a key driver of market optimism.
In Japan, GDP grew at an annualized rate of 2.2% in the final quarter of last year, slower than the 2.8% reported in preliminary data. This slower pace of growth could influence the Bank of Japan’s monetary policy decisions when they meet next week.
On Wall Street, the S&P 500 dropped 2.7% on Monday, while the Nasdaq 100 lost 3.8%. Tesla Inc. saw a 15% drop, and Nvidia Corp. led a decline in chipmaker stocks, which hit their lowest point since April.
The yield on 10-year Treasuries fell nine basis points to 4.21%, driven by expectations that an economic slowdown may prompt the Federal Reserve to cut interest rates. Meanwhile, about 10 high-grade companies delayed their U.S. bond sales.
This latest turbulence in global markets signals a shift away from the previous years’ economic resilience in the U.S. and the exceptionalism that has supported both domestic and global financial markets for more than a decade.
In commodities, oil fell for a second consecutive day, mirroring the equity market’s decline as fears grow that tariffs and other economic measures will hinder global growth. Gold, on the other hand, remained largely steady.
Key Market Movements:
Stocks:
- S&P 500 futures dropped 1% by 10:15 a.m. Tokyo time.
- Japan’s Topix index fell 3%.
- Australia’s S&P/ASX 200 fell 1.8%.
- Hong Kong’s Hang Seng Index declined 1.8%.
- The Shanghai Composite fell 0.2%.
- Euro Stoxx 50 futures decreased 0.7%.
Currencies:
- The Bloomberg Dollar Spot Index dropped 0.1%.
- The euro rose 0.1% to $1.0848.
- The Japanese yen gained 0.4% to 146.66 per dollar.
- The offshore yuan edged up 0.1% to 7.2559 per dollar.
Cryptocurrencies:
- Bitcoin fell 2.9% to $76,976.07.
- Ether lost 4.3%, dropping to $1,787.64.
Bonds:
- The yield on 10-year Treasuries declined six basis points to 4.15%.
- Australia’s 10-year yield fell 10 basis points to 4.34%.
Commodities:
- West Texas Intermediate crude dropped 1.1% to $65.31 per barrel.
- Spot gold remained little changed.
Key Economic Events This Week:
- Japan’s GDP, household spending, and money stock data on Tuesday.
- U.S. job openings report on Tuesday.
- Canada’s rate decision on Wednesday.
- U.S. Consumer Price Index (CPI) report on Wednesday.
- Eurozone industrial production on Thursday.
- U.S. Producer Price Index (PPI) and initial jobless claims on Thursday.
- U.S. University of Michigan consumer sentiment on Friday.
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