A sell-off in global stocks eased on Tuesday in the wake of steep falls on Wall Street fuelled by investor concerns over the health of the US economy.
Futures markets pointed to a small recovery in the US, with contracts tracking the S&P 500 and Nasdaq 100 up 0.4 per cent and 0.5 per cent respectively.
In Europe, the Stoxx Europe 600 was down 0.1 per cent in morning trading, while Germany’s Dax added 0.6 per cent.
The Nasdaq Composite fell 4 per cent on Monday — its worst day in two and a half years — while the S&P 500 index tumbled 2.7 per cent over fears of the economic impact of Trump’s global trade war.
“US data still show an economy in decent shape, but investors are spooked by erratic policy messaging that is undermining consumption and investment,” said Guy Miller, chief market strategist at insurer Zurich. But “US recession fears appear overdone”, he added.
European infrastructure and defence stocks — which have been rallying after Germany last week announced a historic deal to fund investment in the military and infrastructure — were among the gainers on Tuesday.
The euro rose 0.7 per cent to $1.091, recovering almost all its losses since the US election, as investors continued to bet on a better growth picture for Europe on the back of Germany’s “whatever it takes” spending plan announced last week.
“Yesterday’s moves suggest a lot of pain on the Street,” said Mohit Kumar, an analyst at Jefferies. But the market reaction was overdone with “a hard landing or a recession” not on the cards in the US, he added.
In Europe, meanwhile, investors will keep “revising up their growth forecasts and [continue] to invest in defence,” he said.
Germany’s largest defence group, Rheinmetall, rose 2.6 per cent, and Italy’s Leonardo was 1.9 per cent higher, both having surged since the beginning of the year on defence spending hopes. Infrastructure companies also added to their gains, with France’s Schneider Electric up almost 3 per cent.
Asian stocks, which opened sharply lower on Tuesday following the US sell-off, recovered some ground. Japan’s Topix and exporter oriented Nikkei 225 index finished 1.1 and 0.6 per cent lower respectively. China’s CSI 300 advanced 0.3 per cent.
The shifts followed big moves on Wall Street where investors were unnerved by the rhetoric from senior US administration officials over the equity market falls. Trump said there would be a “period of transition” as the economy adjusted to a global trade war.
Technology and industrial companies led the falls in Asia. Taiwan’s chip manufacturer TSMC was down 2.7 per cent, Korea’s Samsung Heavy Industries retreated 2.1 per cent and Tokyo Electron ended the day down 0.5 per cent.
“It will be a volatile market globally this year, with Trump and [presidential adviser Elon Musk’s] daily news hitting headlines,” said Thomas Fang, head of UBS China global markets.
Other analysts noted US tech stocks had rallied hard over the past year, leading some investors to take profit.
“The whole [US] tech sector has risen so much since last April, even with the correction now, it has still rallied a lot,” said Wee Khoon Chong, a senior markets strategist at BNY.
“People worry this is going to be a meltdown, but I don’t think so,” he added.
“When you have a new, better option, people adjust, valuations adjust,” Chong said.
US Treasuries were also steady, with the 10-year yield down 0.01 percentage point to 4.21 per cent.
The US dollar, which has been dragged lower by concerns over the health of the world’s biggest economy, fell 0.6 per cent against a basket of six trading partners and is down 4.8 per cent since the start of the year.
Oil prices rose, with Brent futures — the international benchmark — up 0.5 per cent at $69.64 per barrel, after a fall on Monday amid rising uncertainty over global demand.
Gold rose 0.7 per cent to $2,909 per troy ounce.
