Trump Disrupts Global Economic Order Even Though the US Is Dominant

BENGALURU (April 9): Asian emerging market equities tanked for a fifth straight session on Wednesday as US President Donald Trump's "reciprocal" tariffs on dozens of countries, including the eye-watering 104% levies on Chinese goods, went into effect.

Indonesia's rupiah hit a fresh lifetime low, while yields on the 10-year benchmark bonds crept higher towards a mid-January high as traders worried about the fallout of escalating trade tensions and domestic economic concerns.

Trump's punishing tariffs, including the massive levies on China, deepened the carnage in financial markets globally and caused a sell-off in the 10-year US Treasury, considered the globe's benchmark safe-haven anchor. China has vowed to fight what it views as blackmail.

"A major trade war between the US and China will not be the best piece of news for markets in the short term," said Vasu Menon, managing director, Investment Strategy at OCBC.

An MSCI gauge of Asian emerging market equities plunged 2.2% to its lowest in a year and fell deeper into oversold territory. A subset of equities in Asean countries also hit a 17-month low.

Most Southeast Asian equity indices were also oversold and were either creeping towards or had confirmed a bear market. Many of these countries count China as their biggest trading partner and have also been hit with hefty tariffs.

In Singapore, the benchmark index fell for the eighth straight session and has lost about 15% since its all-time high less than two weeks ago. It dropped more than 2% on the day to hit a seven-month low. It dipped into oversold territory this week for the first time since early August last year.

Malaysia's stocks hit their weakest point in 18 months. South Korea's Kospi fell 0.5%, while Taiwan's benchmark index shed 5% to hit the lowest since mid-January last year. Thai stocks dipped about 1%.

Currencies were broadly under pressure on the day, with a weakening Chinese yuan — trading at 19-month lows — pressuring units of countries with close trade ties to China.

Indonesia's rupiah plunged to 16,970 a dollar in the morning session but largely recovered the day's losses as the central bank intervened. Thailand's baht slipped to a four-month low, while the Malaysian ringgit hovered around its weakest since early February.

"The more bearish China growth outlook will put Asian currencies with higher China exposure under pressure, and some Asian countries may compete to depreciate their currencies against RMB (yuan)," said Ken Cheung Kin Tai, chief Asian FX strategist at Mizuho Bank.

India's Nifty 50 declined while the rupee hit a three-week low after the central bank lowered its key repo rate for a second consecutive time.

Source: Theedgemarkets

RBNZ widely expected to cut rates

Source:MarketPulse

Source:James Picerno

Analysts at Morgan Stanley have slashed their prediction for U.S. economic growth this year and projected a sharp firming in inflation, citing possible disruptions from President Donald Trump’s tariff agenda.

In a note to clients, the strategists led by Michael Gapen said they now expect real U.S. gross domestic product to come in at 0.8% in 2025 and 0.7% in 2026, down from their earlier forecasts of 1.5% and 1.2%.

Headline and core personal consumption expenditures -- a key gauge of inflation closely watched by the Federal Reserve -- are also tipped to stand at 3.4% and 3.9%, respectively, by the end of the year. These would be about a full percentage point higher than previous expectations, the analysts flagged.

The unemployment is seen increasing to 4.9%, as higher uncertainty around the trajectory of Trump’s tariffs weighs on business confidence and hiring.

Although they are not anticipating a recession for the U.S. economy, "the gap between a sluggish growth outlook and a downturn has narrowed," the analysts said.

"Our narrative entering the year was ’slower growth, stickier inflation.’ In our March revisions our narrative shifted to ’slower growth, firmer inflation’ since an earlier implementation of tariffs was halting disinflation at a higher pace of inflation. Now our narrative is squarely in the realm of ’even slower growth and sharply firming inflation.’"

The analysts noted that the scope of some of Trump’s tariffs could be "negotiated lower," although they acknowledged that previously "underestimated both the speed of tariff implementation and the level of tariffs put in place."

Markets are still attempting to understand if the Trump administration plans to permanently impose the tariffs, which include a minimum 10% levy for all U.S. imports and targeted rates of up to 50%, or use them as a cudgle during negotiations with trading partners. On Monday, Trump said "both can be true."

U.S. Trade Representative Jamieson Greer is due to tell the Senate Finance Committee on Tuesday that he has been approached by almost 50 countries asking to discuss Trump’s sweeping tariffs, according to media reports.

Greer will say in written testimony that several of these countries, like Argentina, Vietnam, and Israel, have suggested they will bring down their tariffs and non-tariff barriers, Reuters reported.

Source: Investing