Wall Street futures fell sharply on Monday as deepening deflationary concerns in China and fears of a global economic slowdown sent investors fleeing to safe-haven assets. The Japanese yen and Swiss franc strengthened while U.S. Treasury yields slid, reflecting heightened risk aversion across financial markets.
Wall Street Futures Slide Amid Economic Uncertainty
As of 0609 GMT, S&P 500 futures (ES1!) dropped 0.5%, while Nasdaq futures (NQ1!) fell 0.6%, signaling a weak start for U.S. equities. The decline comes amid growing worries about the impact of soft U.S. economic data and President Donald Trump’s aggressive trade policies.
Asian markets mirrored Wall Street’s bearish sentiment, with Hong Kong’s Hang Seng (HSI) plunging 1.8%, and an index of mainland Chinese blue chips slipping 0.7%. Taiwan’s TWSE:TAIEX also lost 0.5%. However, Japan’s Nikkei (NI225) managed a slight 0.4% gain after oscillating between gains and losses.
China’s Deflation Deepens Despite Government Stimulus Pledge
Fresh economic data from China revealed that the country’s consumer price index declined at its steepest pace in 13 months, while producer price deflation extended to a 30th consecutive month. The worsening deflationary trend has added pressure on Beijing to roll out further stimulus measures.
At the National People’s Congress meeting, which runs until Tuesday, China’s leadership vowed to boost domestic consumption and accelerate artificial intelligence innovation to counteract slowing economic momentum.
Yen and Swiss Franc Gain as Risk-Off Trade Prevails
The Japanese yen (USDJPY) appreciated 0.3% to 147.605 per dollar, while the Swiss franc (USDCHF) strengthened 0.2% to 0.8780 per dollar as investors sought safety in traditional haven currencies. Meanwhile, the U.S. dollar index (DXY) gained 0.1% to 103.82, reversing earlier losses.
European Markets Offer a Silver Lining
Unlike their Asian counterparts, European markets showed resilience, with pan-European STOXX 50 futures (FESX1!) rising 0.55%. This suggests that investors are still willing to take on some risk in the region despite global uncertainties.
U.S. Trade War Concerns Escalate
In an interview with Fox News on Sunday, President Trump refused to rule out the possibility of a U.S. recession as a result of his tariffs on China, Canada, and Mexico. His trade policies have already led to a turbulent market environment, with investors struggling to gauge the potential economic fallout.
Notably, Trump hinted at imposing reciprocal tariffs on Canadian dairy and lumber, leaving analysts bewildered by the rapid shifts in trade policy. “For those struggling to keep up, that means that Canadian tariffs were imposed on Tuesday, tweaked on Wednesday, delayed on Thursday, then expanded again on Friday,” said Michael Brown, senior research strategist at Pepperstone.
Further adding to trade tensions, Trump signaled he is considering new sanctions on Russian banks and tariffs on Russian imports to expedite an end to the war in Ukraine.
Treasury Yields Slide as Investors Seek Safety
The risk-off sentiment pushed U.S. Treasury yields lower, with the 10-year yield (US10Y) dropping 6 basis points to 4.257%, and the two-year yield (US2YT) falling 4.5 basis points to 3.956%. These moves suggest investors are shifting toward safer assets amid rising economic uncertainties.
Crude Oil and Bitcoin Struggle
Crude oil prices also took a hit, with Brent crude (BRN1!) slipping 0.5% to $69.99 per barrel, while U.S. West Texas Intermediate (CL1!) declined 0.6% to $66.63 per barrel. Concerns over sluggish global demand and uncertainty surrounding Trump’s policies weighed on the energy markets.
Meanwhile, Bitcoin (BTCUSD) plummeted as much as 7.2% from Friday to hit a monthly low of $80,085.42 before recovering slightly to $82,280. Optimism over looser cryptocurrency regulations and the potential creation of a digital reserve under Trump had previously pushed Bitcoin to an all-time high of $109,071.86 in January, but it has struggled since.
Looking Ahead
With U.S. equity futures in the red, China’s economic troubles mounting, and uncertainty around Trump’s trade policies growing, global markets are on edge. Investors will closely watch upcoming economic data and further developments at the National People’s Congress in China for potential market-moving catalysts.
