Global Stock Selloff Eases As Markets Recover From Early Declines

A global selloff in stocks showed signs of easing during Asian trading hours as key assets such as US equity-index futures, Treasury yields, and cryptocurrencies rebounded from sharp early declines. Despite the recovery, investor sentiment remained cautious, as concerns about potential economic downturns due to tariff wars and government spending cuts continued to weigh on markets.

Equity-index futures for the S&P 500 surged by as much as 0.3%, after experiencing a 1% drop earlier in the day. Contracts for the Nasdaq 100 and European stocks also posted gains, signaling a return of some optimism. Asian markets similarly began to recover, with Hong Kong and China trimming their losses, while the yield on two-year US Treasury bonds climbed after falling to its lowest level since October.

Investor sentiment has shifted toward caution in the wake of US President Donald Trump’s presidency, as concerns grow over the economic impact of a potential tariff war, spending cuts, and major changes to global geopolitical dynamics. Despite this, some investors are viewing the downturn as an opportunity to purchase stocks, particularly in Hong Kong and China, where government measures to stimulate the economy are anticipated.

Kok Hoong Wong, head of institutional equities sales trading at Maybank Securities, noted that many investors are still on the lookout for buying opportunities amid market corrections. “Hong Kong/China could be an interesting candidate for this,” Wong said, reflecting a growing interest in regions where positive developments are expected.

In the US, markets took a hit on Monday, with the S&P 500 dropping 2.7% and the Nasdaq 100 shedding 3.8%. Notably, shares of Tesla Inc. plunged by 15%, while Nvidia Corp. led a decline in chipmaker stocks to their lowest levels since April. As a result, approximately 10 major companies postponed US bond sales.

Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, explained that the selloff seemed like a liquidation of crowded positions, coupled with a “buyers’ strike” due to uncertainty surrounding Trump’s stance on the stock market and Federal Reserve Chairman Jerome Powell’s cautious approach to interest rate changes.

Garfield Reynolds, Markets Live Strategist, pointed out that the US-driven selloff is exacerbated by a belief that central banks are unlikely to rush to support the economy this time around. Investors, he said, need to consider that monetary policy may remain restrictive in many economies for the foreseeable future.

Despite a risk-off mood dominating global markets, mainland Chinese investors bought a record amount of Hong Kong stocks, continuing their strong support for the local market, particularly in the tech sector. The rise of DeepSeek, a Chinese startup offering groundbreaking AI models, has contributed to a tech-driven rally this year.

Marvin Chen, a strategist at Bloomberg Intelligence, suggested that China may be better positioned to weather the current downturn due to its policy divergence during the ongoing National People’s Congress (NPC) meeting. He added that Chinese stocks are on track to post their best performance during the NPC since 2018.

In other parts of the world, Australian stocks hit a seven-month low, and the Nikkei 225 Index fell to its lowest point since September. Investors have been increasing hedges by shorting futures and options, which has often intensified market sell-offs. Rajeev De Mello, a global macro portfolio manager at Gama Asset Management, expressed caution, noting that investor sentiment has turned increasingly risk-averse.

Citigroup strategists downgraded US stocks to neutral from overweight while upgrading China to overweight, citing concerns that US economic exceptionalism may be on pause. Meanwhile, HSBC raised its rating on European equities, excluding the UK, to overweight, anticipating that eurozone fiscal stimulus could have a “game-changing” impact.

In the currency markets, most Group-of-10 currencies rose against the US dollar on Tuesday. The euro saw a 0.3% increase to $1.0866, supported by strong growth prospects in the region. The Australian and New Zealand dollars, however, posted the largest declines of the session.

In commodities, oil prices steadied after recent declines, while gold gained in value. Cryptocurrencies, which had earlier lost ground due to concerns over the US equity selloff, recovered some of their losses, with Bitcoin rising 1.2% to $80,240.42 and Ether gaining 1.2% to $1,891.38.