Indices across Asia are nursing painful losses this morning (7 April), with the Hang Seng down 13% and Japan’s Nikkei down around 8%, as investors question the competence of Donald Trump’s Government. However, Trump has shrugged off market turmoil, referring to the tariffs as “medicine”.
In the UK, the FTSE 100 plunged 6% to a one-year low at the start of trading today (7 April).
Cryptocurrency Bitcoin has joined the sell-off, dropping more than 6% since Sunday to $76,000. The currency was valued at more than $100,000 in December 2024.
Dan Coatsworth, investment analyst at AJ Bell, said: “The escalation in tariffs is bad for US companies who buy goods from China, and vice versa, because their costs will go up. It’s also bad for the world in general, as we now have a repeat of the heightened geopolitical tensions between the US and China, which dominated Trump’s first term in office.
“The rapid pullback in stocks and shares over the past few days has put a dent in people’s investments, including those in the US who were meant to have benefitted from Trump’s actions. Instead, his tactics have caused shockwaves in every corner of the world.”
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‘Pessimism spreads about the outlook for world trade’
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The big flight to cash continues as investors seek a shelter for their money amid the tariff storm. Trump has dashed hopes for an easing of policy by calling tariffs ‘medicine’ and investors are absorbing the implications of this bitter pill for the global economy.
“The FTSE 100 has opened deep in the red, falling more than 5% in early trade, as pessimism spreads about the outlook for world trade. While the biggest fall this century was the pandemic-induced 10.8% drop on 12 March 2020, the losses in recent days are steep, an indication of the fear spreading about the implications of the White House approach.”
Banking shares have seen double-digit declines. This is particularly worrying as banks are seen as barometers for economic health.
Warnings of a recession are also showing up in the bond markets. Falling treasury yields are an indication that the chance of recession is increasingly being priced in. Oil prices are also continuing to slide, as traders assess that demand for energy will drop back sharply, given the ominous signs for global trade.
In times of high economic and geopolitical uncertainty, gold often is seen as a safe haven, but it has now fallen away from record highs seen last month, as more investors book profits and plough into cash.
Streeter said: “The tech stock turmoil looks set to rampage for another day on Wall Street. The bears are already out in force across the NASDAQ, and futures indicate another steep fall for the index. The halcyon days of cheap manufacturing and easy markets appear to be over.
“With, as yet, no indications of a rolling back of tariffs, investors are reassessing earnings estimates denting valuations. This will have a knock-on effect on US consumer confidence, which has already fallen sharply. Given so many Americans invest in the stock market, which acts as a safety blanket for life’s expenses, the stock market rout will dent wealth perceptions, which may make a downturn even deeper.
“A sea of red on markets will inevitably be troubling for investors. It is however, important not to panic and look at long-term investment horizons. History has shown that markets do recover from times of crisis and high uncertainty. It is always worth keeping an eye on an investment portfolio and ensure that you are well diversified across a mix of geographies and asset classes to spread the risk. Drip feeding an investment portfolio can also help ride out the volatility.”
