Wild open as US Fri plunge extends into Asia and Trump admin officials remain adamant

Asia Market Update: Wild open as US Fri plunge extends into Asia and Trump admin officials remain adamant; JP equities plunge to Aug 5th, 2024 levels (Yen unwind), as CN/HK equities play catchup; Commodities continue plunge; HOWEVER, initial plunges pare losses as session continues.

General trend

- The volatility fall out from Trump’s April 2nd Liberation Day tariff announcement was compounded on Friday by China retaliating with its own 34% tariffs on all US goods from April 10th, the first country to retaliate and thus raise fear of a full-blown trade war between the world’s two largest economies. The China and Hong Kong bourses were closed for a holiday on Friday, but prior to the Asia markets opening on Monday Trump accused China of panicking and “playing it wrong”, adding later, "China has been hit much harder than the USA, not even close".

- Some market analysts over the weekend expressed hope that Trump might back down given the financial carnage in markets, but soon after the Asia open Pres Trump confirmed he is not making a China deal unless the trade deficit is solved. Meanwhile, defying Friday night rumors that he may resign, Treasury Sec Bessent on the Sunday talks shows said that there does not have to be a recession and that the market 'underestimates' Trump.

- Game of Chicken playing out between Trump Admin and financial market players [Wall St brokers, hedge funds (Bill Ackman), financial media] amid recession calls

- US equity FUTs during Asian trading reopened NASDAQ -3%; S&P500 FUTs -2.6%; NASDAQ quickly extended declines to >-6%; S&P500 extended to -5.5%; Late Asian levels NASDAQ -4.7 %, S&P500 -3.5%.

- Nikkei 225 down as much as 8%; Kospi -5.3% (triggering circuit-breakers) with Hynix -7% and Australia ASX lowest since Dec 2023 with only 3 stocks (out of 200) not in the red after 20 minutes of trading. JP officials urge investor calm in the face of volatility and circuit breakers.

- Hang Seng crashed-10.7% and down -23% since March highs; Alibaba and Baidu both down more than 12% BYD -13%, Lenovo -17%.

- WTI Crude dropped a further 3% in early Asian trading to <$60/bbl; Copper -6% to 4.12/lb; Silver dropped well into the $28 handle; Bitcoin fell to $77K. However, as the session continued Silver turned around to be above the open +2% to >$30/oz, with Copper also retracing its gap-down open to be up +2.5%. Gold also pared losses.

- Japanese Yen and Swiss Franc both gapped higher at the opening of the trading week in flight to safety and remained higher during the session despite some paring of gains.

- Companies continue to change investment decisions as a result of the Trump tariffs; Nissan said to move production of its Rogue model from its factory in Japan's Fukuoka prefecture to the US, a reversal from earlier plans to cut US production of the vehicle.

- On the nation-state level, Taiwan today reportedly joined Vietnam on Friday to become the first countries to offer to cut tariffs on US imports to zero. Trump advisers say 50-plus countries have reached out for tariff talks with White House.

- In Sovereign bonds Australia 3-years fell to lowest level since May 2023; JP 10-year yields lost as much as -8bps before recovering back to 1.13%; CN 10-year yields played catch up after Friday holiday, -15bps to 1.64%.

- There will be interest this Wednesday as the RBNZ will be the first Central Bank with a rate decision to make post-Trump tariffs, a decision perhaps complicated by the sudden retirement of Gov Orr in March.

Looking ahead (Asian-weighted news, on Asian time zone)

- Tue Apr 8th AU Apr Consumer, AU Mar Biz Confidence.

- Wed Apr 9th NZ RBNZ Rate Decision, JP Mar Biz Confidence, JP Gov Ueda speech, RBI Rate Decision, (Wed night FOMC Minutes).

- Thu Apr 10th CN Mar CPI, (Thu night US Mar CPI).

- Fri Apr 11th NZ Mar Biz PMI, (Fri night CN Mar New Yuan Loans, US Mar PPI, US Apr Michigan Consumer Sentiment).

- Sat Apr 13th CN Trade Balance.

Holidays in Asia this week

- Mon Apr 7th Indonesia, Thailand, Vietnam.

- Wed Apr 9th Philippines.

- Thu Apr 10th India.

Headlines/economic data

Australia/New Zealand

- ASX 200 OPENS -1.5% AT 7,554; Quickly extends losses to -6.3% to 7,302.

- Australia Mar ANZ-Indeed Job Advertisements M/M: +0.4% v -1.4% prior.

- Australian dollar trades below 60c v greenback first time since Covid pandemic in Mar 2020.

- Australia Treasurer Chalmers: A "dark cloud" hangs over the global economy; Escalating trade tensions, tariffs have 'crushed confidence' - financial press.

- Woodside Energy: To sell 40% stake in Louisiana LNG infrastructure; Stonepeak to provide $5.7B to Capex.

- Australia Treasury: US tariff effects on economy "seen to be modest" - financial press.

- NZIER: Monetary Policy Shadow Board: Recommends 25bps OCR cut in Apr.

- Kiwibank Economist: RBNZ could give serious thought to 50bps rate cut at Apr meeting; rate traders see the probability of a 50bps rate cut at 25% – US financial press.

- New Zealand PM Luxon: Looking to lift defense spending to 2% of GDP over 8 years - financial press.

China/Hong Kong

- HANG SENG OPENS -9.3% AT 20,730 (FOLLOWS HOLIDAY ON FRIDAY); Down 23% from March highs; SHANGHAI COMPOSITE OPENS -4.5% AT 3,193 (FOLLOWS HOLIDAY ON FRIDAY).

- CHINA MAR FOREIGN RESERVES: $3.24T V $3.252TE [highest since Nov 2024].

- China 10-year yields -10bps.

- Renewed speculation that China may have room to cut RRR– People's Daily Op-ed.

- China govt: US should stop using tariffs as a weapon to suppress china's economy and trade - China state media - update.

- BYTEDANCE.IPO US Pres Trump said expected to sign EO on extension of TikTok US unit sale April 5th; Confirms discussions with US govt; Any deal will be subject to approval under Chinese law [weekend update].

- Analysts: China policymakers expected to undertake "more" proactive measures to support the property sector - financial press.

- (US) Fox's Gasparino: "I have heard from Wall Street sources close to the Trump White House that Treasury Secretary Scott Bessent is trying to moderate--albeit quietly--the president's hard line stance on trade" - X post [weekend update].

- US Pres Trump: "China has been hit much harder than the USA, not even close"; Tells Americans to 'hang tough' - Truth Social [weekend update].

- US Pres Trump: 'CHINA PLAYED IT WRONG, THEY PANICKED - THE ONE THING THEY CANNOT AFFORD TO DO!' - Truth Social post [weekend update].

- CHINA ANNOUNCES EXTRA 34% TARIFFS ON "ALL" US GOODS; EFFECTIVE FROM APRIL 10TH; ALSO ANNOUNCES RESTRICTIONS ON SOME. RARE EARTH-RELATED ITEMS – PRESS; - Adds 16 US entities to 'export control list'; To suspend export qualifications for 16 US companies; Adds 11 US entities to ‘unreliable entity list' [weekend update].

- China blocks poultry, sorghum and bone meal imports from two closely held US producers [weekend update].

- China files WTO lawsuit against US over reciprocal tariffs - China state media [weekend update].

- China MOFCOM publishes list of 16 US companies placed on export control list [weekend update].

- China PBOC sets Yuan reference rate: 7.1980 v 7.1789 prior (weakest since Nov 27th, 2024 at 7.1982).

- China PBOC Open Market Operation (OMO): Injects CNY94B in 7-day reverse repos; Net drains CNY152B v injects CNY5B prior.

Japan

- *NIKKEI 225 OPENS -1.9% AT 33,150; Quickly extends losses to -6.2% at 31,695; Down 20% from Dec highs.

- Japan 2-year JGB yield falls 7bps to 0.54% v 0.50% BOJ target rate.

- Japan PM Ishiba: Strongly urges US to reduce tariffs - financial press.

- Japan PM Ishiba instructs cabinet to watch markets closely - US financial press.

- Japan Fin Min Kato: Reiterates strongly urge US to exempt Japan from tariffs; financial and capital markets are 'unstable' globally.

- Nissan reportedly considering transfer of some domestic vehicle production to the US this summer in order to avoid exports and tariffs – Nikkei.

- Japan Fin Min Kato: Reiterates strongly urge US to exempt Japan from tariffs; financial and capital markets are 'unstable' globally.

- Japan CDPJ's Leader (opposition) Noda: PM Ishiba is setting up call with Trump; Tariffs creating extremely serious situation [weekend update].

- Former BOJ board member Sakurai: BOJ could raise rates again in May or June by 25bps to 0.75%, then pause [weekend update].

Korea

- KOSPI OPENS -4.3% AT 2,359.

- Kospi program trading for sell orders halted; 'Sidecar" triggered.

- South Korea Fin Min Choi: Discusses countermeasures with ministers, strategy on US tariffs - financial press.

- South Korea govt / FSC said to be planning emergency KRW100T ($68B) liquidity support for industries hit by US tariffs - South Korea media.

- Follow up: South Korea tentatively sets Jun 3rd as Presidential Election Day - Korea press.

Other Asia

- India government official does not expect the Trump tariffs to impact ‘budget math’ – US financial press.

- Taiwan's Taiex index -6.8% in early trading to 19,852 (post Friday holiday); Has fallen 21% since July peak.

- Taiwan Semiconductor falls by limit -10%.

- Taiwan Stock Exchange (TWSE) to stabilize stock markets in case of 'irrational decline' - US financial press.

- Taiwan said to consider 'zero-tariff' negotiations with the US - financial press.

- Taiwan Premier Cho Jung-tai: Tariffs will have significant impact on electronics exports [weekend update].

- Vietnam Communist Party leader To Lam: Confirms Vietnam ready to cut tariffs on US imports to zero; Asks US to do the same - Vietnamese state media [weekend update].

- (VN) Trump tariffs could hurt Vietnam exports by approx 2% of the nation's GDP – press.

- Foxconn (2317.TW) Reports Mar (NT$) Rev 552.1B, +23.4% y/y (record high for the quarter) [weekend update].

- Singapore Central Bank (MAS): To release Monetary Policy Statement and advance Q1 GDP on Apr 14th.

North America

- CEO Bill Ackman: Pershing Square does Not have margin leverage - financial press.

- *(US) TRUMP: NOT MAKING CHINA DEAL UNLESS THE TRADE DEFICIT IS SOLVED - Financial press.

- *(US) NASDAQ FUTs reopen -3%; S&P500 FUTs -2.6%; NASDAQ quickly extends declines to >-6%; S&P500 extends to -5.5%.

- *WTI Crude drops further 3% in early Asian trading to <$60/bbl; Copper -6% to 4.12/lb.

- (US) Treasury Sec Bessent said there does not have to be a recession; noted the market 'underestimates' Trump – NBC Meet the Press [update].

- *(US) PRES TRUMP: TO THE MANY INVESTORS COMING INTO THE UNITED STATES AND INVESTING MASSIVE AMOUNTS OF MONEY, MY POLICIES WILL NEVER CHANGE. THIS IS A GREAT TIME TO GET RICH, RICHER THAN EVER BEFORE!!! - Truth Social Post [weekend update].

- (US) President Trump: This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always “late,” but he could now change his image, and quickly. - Truth Social post [weekend update].

- (US) Treasury Sec Bessent: Regarding what concerns him, worried that tax bill gets bogged down somehow - podcast comments [weekend update].

- *(US) FED CHAIR POWELL: TARIFFS LIKELY TO RAISE INFLATION IN COMING QUARTERS; MORE PERSISTENT EFFECTS POSSIBLE [weekend update].

- *(US) MAR CHANGE IN NONFARM PAYROLLS: +228K V +140KE (above all analysts' estimates) [weekend update].

Europe

- (UK) PM Starmer's office: Starmer and France's Macron agreed that a trade war was in nobody's interests, but nothing should be off the table [weekend update].

- (UK) Reportedly UK has offered to cut tariffs on US beef and fish; Trade discussions are ongoing - Washington Post [weekend update].

- (EU) ECB's Schnabel (Germany): Some people had the view that Trump's 'Liberation Day' could be the day of peak uncertainty, but I'm not entirely sure that is the case [weekend update].

Levels as of 00:20 ET

- Nikkei 225 -6.1%, ASX 200 -3.7%, Hang Seng -11.0%; Shanghai Composite -6.6%; Kospi -5.2%.

- Equity S&P500 Futures -3.3%; Nasdaq100 -4.2%; DAX -3.9%; FTSE100 -0.7%.

- EUR 1.0878-1.1001; JPY 144.82-146.85; AUD 0.5935-0.6061; NZD 0.5521-0.5602.

- Gold +0.6% at $3,053/oz; Crude Oil -2.2% at $60.69/bbl; Copper +3.0% at $4.3968/lb.