Global Markets Continue Volatile Slide Amid Economic Uncertainty

Global equity markets continued their downward trajectory Thursday, extending a two-week period of heightened volatility that has led to significant losses for hedge funds and prompted Wall Street strategists to lower their US stock forecasts. European, US, and Asian futures all posted losses, with the Euro Stoxx 50 futures falling 0.5%, while Nasdaq 100 contracts dropped over 1%, reversing Wednesday’s gains prompted by lower-than-expected US inflation data.

US Treasuries saw slight gains, and the yen strengthened after Bank of Japan Governor Kazuo Ueda expressed optimism about rising real wages and improved consumer spending, signaling potential economic recovery.

Market Turmoil Reflects Growing Economic Concerns

The recent market fluctuations underscore the rising uncertainty in global markets, fueled by a combination of economic data and political tensions. Concerns over a potential US economic slowdown have intensified, as higher unemployment rates and job cuts in the federal workforce raise fears of decelerating growth. President Donald Trump’s escalating tariff disputes and the global geopolitical shift caused by the war in Ukraine further exacerbate investor anxiety.

Michael Brown, Senior Research Strategist at Pepperstone Group Ltd., noted the market’s struggle to maintain gains, warning that the current volatility signals a cautious environment for investors. “This still strikes me as a market that simply cannot hold on to any gains at the moment, which should be a big red flag for potential dip buyers,” Brown remarked.

Revised Forecasts Amid Market Volatility

Equity strategists have begun revising their outlooks for the US market. Goldman Sachs recently joined Citigroup and HSBC in downgrading US equities, signaling concern over the direction of US stocks in the face of growing global uncertainties. Earlier this week, Citi shifted its position on US equities, downgrading them to neutral while upgrading China’s outlook.

Charu Chanana, Chief Investment Strategist at Saxo Markets, pointed out that the market’s late realization that a soft CPI print wouldn’t immediately shift the Federal Reserve’s policy trajectory has contributed to the current volatility. “Growth fears, which have been intensified rather than alleviated by soft inflation data, remain a dominant concern,” she explained.

Political Tensions and Trade Wars Add to Economic Woes

In political developments, Senate Democratic leader Chuck Schumer announced his party’s intention to block a Republican spending bill aimed at averting a government shutdown. Schumer called for the GOP to adopt a Democratic plan to fund the government through April 11, increasing concerns about the US government’s fiscal stability.

Homin Lee, Senior Macro Strategist at Lombard Odier, stressed the importance of a timely tax cut package to boost investor sentiment amid rising concerns over trade tensions. “Any legislative setbacks, like a shutdown, could undermine expectations and further dampen investor confidence,” Lee warned.

Trump’s Trade War Escalates

The global trade conflict continues to intensify, with President Trump signaling a response to the European Union’s countermeasures against US tariffs on steel and aluminum. The EU’s retaliatory actions heighten the risk of further escalation in Trump’s trade war. In a related move, Canada imposed new 25% tariffs on approximately $20.8 billion worth of US-made goods, including steel and aluminum, in retaliation for US tariffs on these materials.

Hong Kong and Asia Show Diverging Market Trends

Hong Kong’s stock market, however, has proven resilient, becoming one of the standout performers in global markets since Trump took office. The Hang Seng Index has surged 20% since Trump’s inauguration, making it the top performer globally. According to sources, Hong Kong’s stock exchange is considering options to reduce the threshold for investors to purchase some of the city’s most expensive stocks to encourage trading.

Frank Benzimra, Head of Asia Equity Strategy at Societe Generale, remarked that the near-term outlook for Hong Kong and other Asian markets is heavily dependent on the direction of the US economy. “Tariff fears may be easing, but uncertainties remain,” Benzimra said.

Signs of Stabilization in US Equity Markets

Despite the ongoing volatility, some strategists suggest that the worst may be over for US equities. According to JPMorgan Chase & Co., the current US equity correction may be nearing its end. Credit markets are signaling a reduced risk of a recession, and continued inflows into US equity exchange-traded funds (ETFs) could point to a potential recovery.

JPMorgan strategists Nikolaos Panigirtzoglou and Mika Inkinen noted that the resilience of US ETFs suggests that “the majority of the current US equity market correction is behind us.”

Bond and Commodity Markets Respond to Economic Signals

In the bond markets, US Treasury yields edged slightly lower, with the yield on 10-year Treasuries declining by two basis points to 4.29%. Similarly, Germany’s 10-year yield dropped two basis points to 2.88%, while the UK’s 10-year yield rose five basis points to 4.72%.

In commodities, gold experienced a modest increase, trading around $2,940 per ounce, while oil prices fell by 0.3% to $67.50 per barrel following a sharp gain earlier in the week.