By: Payel
Published on: Mar 13, 2025
Introduction
Asian stock markets experienced a turbulent session as ongoing concerns over former US President Donald Trump’s trade war overshadowed a below-forecast US inflation reading. Despite Wall Street’s much-needed gains, investors in Asia struggled to maintain momentum, reflecting the persistent uncertainty surrounding global trade policies and their economic implications. This blog delves into the factors driving market volatility, the impact of Trump’s tariff agenda, and what lies ahead for investors navigating this complex landscape.
The US Inflation Report: A Temporary Respite
On Wednesday, data revealed that US consumer inflation slowed slightly more than expected in February, marking the first full month of Trump’s second term. The report showed that core inflation, which excludes volatile food and energy prices, also came in below consensus. This provided a brief reprieve for investors, tempering fears of a recent uptick in prices.
However, analysts were quick to caution that the data largely predates the potential impacts of Trump’s tariffs. Tapas Strickland of National Australia Bank noted, “It’s worth noting the data was for February and thus largely pre-dates any potential tariff impacts.” This underscores the limited relief the inflation report offers in the face of broader economic uncertainties.
Trump’s Trade War: A Lingering Threat
Donald Trump’s aggressive trade policies, including tariffs and pledges to slash taxes, regulations, and immigration, have reignited fears of inflation and economic instability. Investors are increasingly concerned that these measures could force the Federal Reserve to hike interest rates again, potentially triggering a recession.
Stephen Innes of SPI Asset Management warned that while markets reacted positively to the consumer price readings, the underlying uncertainty remains significant. “Let’s be clear, this isn’t a free pass to rally unchallenged. The real question now is how far Trump is willing to push on tariffs and government cuts,” he wrote.
With another round of tariffs set to take effect on April 2, traders are bracing for further volatility. Innes added, “If the past few weeks have proven anything, his tolerance for the ‘pain trade’ (US stocks lower) is far higher than the market assumed.”
Asian Markets: A Mixed Bag
In early Asian trade, markets moved in a tight range, reflecting the cautious sentiment among investors. Key indices showed mixed performances:
Hong Kong, Sydney, Singapore, Wellington, and Jakarta fell, weighed down by trade concerns.
Tokyo, Shanghai, Seoul, Taipei, and Manila rose, buoyed by the temporary relief from the US inflation data.
Mark Hackett of Nationwide likened the current market environment to “trying to catch a falling knife,” highlighting the challenges traders face in navigating the ongoing uncertainty.
The Ukraine Crisis: Another Layer of Complexity
Adding to the market’s woes are developments in the Ukraine crisis. Kyiv has endorsed a US proposal for a 30-day ceasefire, with Washington urging Russia to agree to an unconditional halt to hostilities. However, the Kremlin has yet to indicate its readiness to stop fighting, awaiting further details of the proposal.
Trump warned of “devastating” sanctions if Russian President Vladimir Putin refuses to agree to a ceasefire. This geopolitical tension further complicates the global economic outlook, creating additional headwinds for investors.
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