Asian markets struggled to maintain risk-driven momentum as Chinese shares led regional losses on Tuesday. Investors remained cautious amid speculation over the scope of upcoming U.S. tariff policies.
A key index tracking Chinese technology stocks in Hong Kong dropped as much as 3.8%, marking its steepest decline in three weeks. Major firms such as Alibaba Group Holding Ltd. and Xiaomi Corp. were among the biggest losers. Meanwhile, U.S. and European equity futures edged lower, cryptocurrency markets declined, and the yield on 10-year U.S. Treasuries dipped by one basis point to 4.33%.
Market Volatility and Investor Caution
Chinese stocks have experienced choppy trading in recent sessions as investors adopt a more cautious stance following a strong rally. The global market, which has been under pressure due to concerns over a potential trade war, found some relief as indications emerged that the next round of U.S. tariffs might be more targeted than previously feared.
“Investors remain cautious about the forthcoming tariff policies,” said Graham Chin, an investment strategist at EBSI Private. “The lack of detailed information contributes to ongoing uncertainty, leaving many investors on the sidelines.”
Xiaomi and Alibaba Plunge
Beijing-based Xiaomi Corp. saw its stock drop by as much as 6.6% after selling shares at a discount to raise funds. The company had previously been the best-performing stock on the Hang Seng Index, having tripled in value since August.
Meanwhile, Alibaba Group shares fell by more than 3% following a warning from the company’s chairman about potential risks of a bubble in data center investments.
“China investors are trading more cautiously heading into next week with the upcoming April 2 tariff announcement,” said Gary Tan, a portfolio manager at Allspring Global Investments. He also noted that the imposition of reciprocal tariffs could trigger a broader trade conflict.
Contrasting Market Sentiment
The weakness in Chinese equities stood in contrast to Wall Street’s risk-on sentiment, which saw stocks rally on Monday following a sharp selloff in previous sessions.
U.S. President Donald Trump has twice hinted at possible exemptions or reductions in tariffs for trading partners. He has promoted the April 2 tariff announcement as a “Liberation Day”, signaling a shift toward more protectionist trade policies. On Monday, he escalated tensions with Venezuela by issuing an executive order allowing a 25% tariff on any country purchasing oil and gas from the Latin American nation.
“The markets are pricing out the most extreme downside risks of U.S. tariffs,” said Kyle Rodda, a senior market analyst at Capital. “It could be entirely too premature.”
Calls for Caution in Tariff Strategy
Jon Gray, president of Blackstone Inc., advised investors against making impulsive decisions in response to Trump’s tariff strategy.
“Have a little bit of patience,” Gray said at the Asia Pacific Financial and Innovation Symposium in Melbourne on Tuesday. “Watch this tariff diplomacy evolve and make your investment decisions over a longer period of time. The danger in a period like this is making short-term moves that could result in missed opportunities.”
China’s Monetary Policy and Economic Developments
China’s 30-year bond futures advanced after the People’s Bank of China (PBOC) introduced a new pricing method for its one-year loans to banks. The central bank announced that banks will be allowed to submit different price bids for medium-term lending facility (MLF) loans, marking another step in the country’s monetary policy reforms.
Meanwhile, Australia’s Treasurer Jim Chalmers is set to release the government’s budget later on Tuesday. Economists expect the report to reveal a A$40 billion ($25.1 billion) deficit for the fiscal year through June 2026, an improvement from the A$46.9 billion projected in December’s mid-year review.
Indonesia’s Currency Hits 1998 Levels
Indonesia’s rupiah fell to its lowest level since the Asian Financial Crisis, as investors grew concerned about the country’s fiscal outlook.
In Europe, consumer confidence also showed signs of weakness, with car sales dropping 3.1% in February—the largest decline in five months—as economic uncertainty dampened demand for big-ticket purchases.
Fed’s Caution on Rate Cuts
In the U.S., Federal Reserve Bank of Atlanta President Raphael Bostic warned that tariff hikes could slow disinflation efforts. As a result, he revised his expectations for interest rate cuts, now anticipating just one cut this year instead of two.
Commodities and Market Movements
- Oil prices held onto recent gains, with West Texas Intermediate crude rising 0.1% to $69.20 per barrel.
- Gold prices remained steady near a record high, with spot gold increasing 0.3% to $3,019.13 per ounce.
Key Market Indicators
Stocks
- S&P 500 futures: -0.2% (as of 2:37 p.m. Tokyo time)
- Japan’s Topix: +0.3%
- Hong Kong’s Hang Seng: -1.8%
- Shanghai Composite: +0.2%
- Euro Stoxx 50 futures: -0.3%
Currencies
- Bloomberg Dollar Spot Index: unchanged
- Euro: $1.0803 (unchanged)
- Japanese yen: +0.2% to 150.45 per dollar
- Offshore yuan: 7.2657 per dollar (unchanged)
Cryptocurrencies
- Bitcoin: -1.4% to $86,659.32
- Ether: -1.8% to $2,049.23
Bonds
- U.S. 10-year Treasury yield: 4.33% (unchanged)
- Japan’s 10-year yield: +3.5 basis points to 1.570%
- Australia’s 10-year yield: +2 basis points to 4.42%
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