Black Monday bloodbath: Global markets crash amid fear of escalation in trade war
Asian markets have been hit particularly hard, with markets in Japan and Taiwan hitting circuit breakers for the first time since March 2020
Global markets plunged into chaos on Monday (April 7) amid apprehensions of economic slowdown following US President Donald Trump’s tariff hikes and retaliation from China.
Trump's tariff blitz fulfilled a key campaign promise as he acted without Congress to redraw the rules of the international trading system. It was a move decades in the making for Trump who has long denounced foreign trade deals as unfair to the US. The higher rates are set to be collected beginning Wednesday, ushering in a new era of economic uncertainty with no clear end in sight.
With no signs of de-escalation from major economies in the world, stock markets globally are witnessing high selling pressure, with investors flocking to less risky assets ahead of a potential economic crisis.
Asia
Asian markets have been hit particularly hard, with markets in Japan and Taiwan hitting circuit breakers for the first time since March 2020.
Also read: Trump's tariffs send US stocks into a spiral, Dow Jones down by 1,600 points
Chinese markets often don't follow global trends, but they also tumbled. Hong Kong's Hang Seng dropped 13.5 per cent to 19,770.51, while the Shanghai Composite index lost 7.3 per cent to 3,096.58. In Taiwan, the Taiex plummeted 9.7 per cent. Tokyo’s Nikkei 225 plunged nearly 8 per cent, while South Korea’s Kospi sank over 5 per cent.
Meanwhile, a top Chinese economist said the new set of 34 per cent tariffs imposed by Trump on Chinese exports could impact China’s GDP by two to 2.5 percentage points, further affecting the Chinese economy which is struggling with a slowdown.
Larry Hu, chief economist at investment bank Macquarie, estimated that Trump’s latest tariffs could reduce China’s exports by 15 percentage points and its gross domestic product growth by 2-2.5 percentage points.
China this year has fixed a five per cent GDP target for its economy which is struggling with a slowdown weighed down by stagnating domestic consumption and a crisis in its housing sector.
India
In India, stock markets crumbled on Monday with benchmark Sensex sinking by 2,226.79 points, its steepest single-day decline in 10 months.
The 30-share BSE Sensex crashed 2,226.79 points or 2.95 per cent to settle at 73,137.90, recording its third day of decline. During the day, the index slumped 3,939.68 points or 5.22 per cent to 71,425.01.
The NSE Nifty tumbled 742.85 points or 3.24 per cent to settle at 22,161.60. Intra-day, the benchmark dropped 1,160.8 points or 5.06 per cent to 21,743.65.
All Sensex shares, except for Hindustan Unilever, ended with losses. Tata Steel fell the most by 7.33 per cent followed by Larsen & Toubro which cracked 5.78 per cent.
Tata Motors, Kotak Mahindra Bank, Mahindra & Mahindra, Infosys, Axis Bank, ICICI Bank, HCL Technologies and HDFC Bank were the other big laggards. Hindustan Unilever ended marginally higher.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 3,483.98 crore on Friday, according to exchange data.
US markets
US markets ended sharply lower on Friday. The S&P 500 plummeted 5.97 per cent, the Nasdaq composite slumped 5.82 per cent and the Dow tumbled 5.50 per cent on Friday.
Also read: Trump digs in heels on tariffs, calls them 'medicine' as markets reel
"Both China and Japan index declined by 10 per cent and 8 per cent, respectively. This escalates the stakes in the ongoing trade war and raises concerns about a potential global recession that could affect everyone. On Friday, the US S&P 500 dropped by 6 per cent, and the Dow Jones fell more than 2,000 points, marking its worst week since the COVID-19 crisis. This came after China announced it would impose reciprocal 34 per cent tariffs on all US imports starting April 10," Vikas Jain, Head of Research at Reliance Securities, said.
The sharp increase in tariffs by both the US and China could lead to higher inflation, slower global growth, and intensified trade tensions, he added.
Europe
European markets too came under heavy selling pressure and were trading with up to a 6 per cent decline.
European shares followed Asian markets lower, with Germany’s DAX falling 6.5 per cent to 19,311.29. In Paris, the CAC 40 shed 5.7 per cent to 6,861.27, while Britain's FTSE 100 lost 4.5 per cent to 7,694.00.
“The bloodbath is in full swing, and that’s exactly what you see when you look at the European markets. There is no safe haven; equity markets have entered a complete free-fall with no clear bottom in sight,” Zaye Capital Markets said in a note sent to Euronews on Monday.
Middle East
Middle East stock markets tumbled on Monday as they struggled with the dual hit of the United States' new tariff policy and a sharp decline in oil prices, squeezing energy-producing nations that rely on those sales to power their economies and government spending.
Also read: Indian markets fall in early trade as US stocks tumble towards their worst day in years
Benchmark Brent crude is down by nearly 15% over the last five days of trading, with a barrel of oil costing just over $63. That's down nearly 30% from a year ago when a barrel cost over $90.
Markets that opened Sunday saw losses as well. Saudi Arabia's Tadawul stock exchange fell over 6% in trading then, with further losses of 3% after opening on Monday.
(With agency inputs)
