In the European morning session, markets faced significant declines due to ongoing concerns related to tariffs. The US 10-year yields rose to 4%, and traders began pricing in five potential cuts from the Fed for the year.
Japan’s Nikkei dropped nearly 8%, while Chinese indices fell over 7%, and the Hang Seng lost more than 13%. European stocks opened lower, with the DAX down about 9%, erasing its year-to-date gains.
Market Sentiment Improvement
Despite earlier turmoil, sentiment improved slightly in the past two hours after discussions about delaying EU counter-tariffs and mixed messages from JP Morgan’s CEO. S&P 500 futures recovered to a 1.5% loss and USD/JPY moved up to 146.40.
Gold saw fluctuations, moving from $3,020 to $3,046 before falling again. The market remains volatile with focus on imminent tariff negotiations ahead of the April 9 deadline.
In the past few hours, we’ve seen some tentative stabilisation in the major indices, helped in part by a softening in the tone from key policymakers and corporate sources. The earlier sell-off was driven largely by immediate worries surrounding tariff escalation — a scenario that would tighten financial conditions and curb global trade growth. Yields climbing toward 4% on US 10-years added pressure, suggesting that concerns over inflation remain strong enough to counter calls for aggressive cuts.
Looking more broadly, the reaction in Asia carried weight. With the Nikkei and Chinese indices posting deep losses, it’s clear that markets are reacting not only to tariff threats but also to the knock-on effect these might have on multinational supply chains and capital flows. It’s worth noting that Japan and China hold deep trading relationships with both Europe and the United States — any disruption in those streams quickly reverberates.
Europe’s Market Performance
Europe’s negative open confirms the trend, wiping out gains that had built up over the previous quarter. The DAX retreating that sharply doesn’t just reflect concern over exports — it implies a re-pricing of corporate earnings expectations. The fact that this reversal occurred right at the start of earnings season suggests we could see a cautious tone among corporate guidance in upcoming reports.
There has been some mitigation. Talk of delaying retaliatory tariffs within the European bloc appears to have pulled risk assets slightly back from the edge. Comments from Dimon, though conflicting, managed to reduce pressure on financials. Pair this with the bounce in S&P 500 futures and the move higher in USD/JPY, and it looks like the worst hostility may have been priced in — for now.
Gold’s path illustrates the mood quite well. Brief rallies have been quickly unwound. This back-and-forth in precious metals typically arises when investors are unsure whether to hedge for inflation or hunt for cash liquidity. The inability of gold to hold gains above $3,040 shows that, despite geopolitical jitters, there’s tight competition for safe haven status, particularly as interest-bearing assets edge higher.
From our perspective, pricing behaviour in volatility markets suggests that hedging activity has picked up markedly. That’s sensible, given the proximity of key negotiation deadlines and suspected policy shifts. Emphasis should remain on cross-asset correlation, particularly between yields and equity moves. Commodities may provide less straightforward signals in the days ahead.
Short-term instruments linked to central bank decisions have practically built in five reductions in the Fed’s benchmark rate. This level of certainty from investors, despite the mixed inflation backdrop, creates an asymmetric risk scenario. If macro data fails to confirm slowdown, bond markets could be in for a shake.
We are closely reviewing open interest in rate futures and related ETF flows for more solid position clues. In the coming sessions, expect back-and-forth as verbal interventions, economic readings, and geopolitical sparring continue to drive direction. Markets will be sensitive to any adjustments in stance, particularly from members aligned with more hawkish views previously.
The latent bid underneath USD/JPY may remain intact if Treasury yields hold or extend. Current levels suggest buying interest remains steady into the 145–146 band, provided rate expectations are not dramatically reset. There’s also a possibility that this pair begins reacting more directly to trade headlines again — rather than solely US data — a return to a dynamic last seen in early 2019.
In preparation for next week, it’s advisable to re-assess tail risk positioning and ensure any volatility exposure is within manageable risk bounds. With the April 9th tariff deadline approaching, there are few scheduled policy events that might offset swings from trade updates. Spot liquidity will play a larger role, especially in off-hours trading.
