Stock slump deepens, bonds rise as traders de-risk

In Asia, traders will be parsing Chinese factory activity data for signs prior stimulus announcements are helping steady the economy.

Stocks dropped in early Asian trading ahead of Donald Trump unveiling a fresh round of tariffs. Gold touched a fresh record high, spurred by haven demand due to concerns about economic impact from a global trade war.

Benchmarks in Japan, South Korea and Australia fell, as did S&P 500 futures, amid initial signs that trade wars are beginning to affect the world’s biggest economy. The Australian and New Zealand dollars edged lower while the yen gained. US Treasury yields declined.

Data showing a plunge in consumer sentiment, soft spending and a pickup in prices had pushed US stocks lower on Friday. More volatility is likely this week given it’s the end of the quarter and Trump due to unveil his so-called reciprocal tariffs on Wednesday. Goldman Sachs Group Inc. economists now expect the Federal Reserve will cut interest rates three times this year as tariffs weigh on economic growth and drive up unemployment.

“Markets will be now be fully at the mercy of an impending deluge of tariff-related headlines,” Chris Weston, head of research at Pepperstone Group in Melbourne, wrote.

Trump said he would consider “secondary tariffs” on Russian oil and those who buy it, if a ceasefire with Ukraine can’t be reached. Russia is the world’s third largest producer of crude and it could have far reaching effects on the global economy, particularly China and India which have become key buyers.

In Asia, traders will be parsing Chinese factory activity data for signs prior stimulus announcements are helping steady the economy. Banking stocks will also be closely watched as four of the largest state banks plan a total of up to $72 billion in private placements to boost core tier-1 capital, after Beijing pushed for stronger buffers for lenders to better support the economy.

China’s finance ministry will be the top investor in the deal and will inject $69 billion, with new shares issued at a premium between 8.8% and 21.5% above their Friday closing levels in Shanghai.

Thai markets are also due to reopen after share trading was suspended Friday following a quake in Myanmar that shook buildings and triggered evacuations in neighboring Vietnam and Thailand. Volatility is likely in South Korean stocks with the removal of a 17-month long ban on short selling.

This week, Australia’s central bank is likely to keep its key rate on hold amid a tight national election while European activity data is also due. US jobs data at the end of the week will also be watched.

“While there has been growing concern about the weakness in soft US data, hard data have held up better,” Barclays strategists led by Themistoklis Fiotakis wrote in a note to clients. “This makes vacancies and the employment survey, both due this week, particularly pertinent in assessing the underlying damage to the US economy from tariff uncertainty.”

The US monthly jobs report and comments by Federal Reserve Chair Jerome Powell are also due.