In a tumultuous end to the week marked by global trade tensions, stocks dropped sharply and the dollar weakened further. A frenzied sell-off of bonds ensued, sparking concerns of a potential recession and causing anxiety among investors about U.S. assets.
The escalating unease prompted a flight to safe-haven assets, pushing the Swiss franc to its highest level in a decade against the dollar and propelling gold to new heights. Despite a brief relief rally following President Donald Trump's tariff reduction announcement, asset markets continued to exhibit stress.
The sell-off in U.S. Treasuries accelerated during Asian trading hours, as the 10-year note yield surged to 4.475%, registering the largest weekly increase since 2001. Market experts interpret this sharp decline in Treasuries and the dollar as indicative of waning confidence in the strength of the U.S. economy.
The exodus from U.S. assets is evident as global investors react to the falling currency and bond market, reflecting more profound concerns beyond economic slowdown and trade volatility, according to Kyle Rodda, a senior financial markets analyst.
In the Asian markets, the Nikkei in Japan plummeted by 4.5% and South Korean stocks declined by 1.7%. MSCI's broadest index of Asia-Pacific shares, excluding Japan, experienced a 0.5% dip.
Amid uncertainties surrounding economic growth, inflation, and trade tensions, the short-term outlook for global risk assets remains unclear, says Vasu Menon, managing director of investment strategy at OCBC Bank in Singapore.
Mounting apprehensions over the U.S.-China trade conflict continue following Trump's tariff hikes, countered by corresponding actions from China. The heightened trade tensions have raised speculation about potential further tariff escalations and their impact on global markets.
Chinese stocks had a muted opening on Friday, reflecting the caution prevailing among investors. The CSI300 Index in China was down by 0.5%, and Hong Kong's Hang Seng index dipped by 0.38%.
James Athey, a fixed-income manager at Marlborough, pointed out the prevailing uncertainty, indicating a darker and more ambiguous outlook compared to a month ago, with numerous unresolved questions.
The U.S. dollar has been under sustained pressure in recent weeks, leading investors to seek refuge in the Japanese yen, the Swiss franc, and the euro, amid the turbulent market conditions.