Asian stocks rebound amid US trade turmoil

[SINGAPORE] Asian equities rose when trading resumed on April 8, following a turbulent session in the United States overnight, as US President Donald Trump kept investors on edge with conflicting tariff comments.

Japan's Nikkei index rose 5.6% after falling an eye-watering 7.8% the day before, as US tariffs drive market instability. Following a call with Prime Minister Shigeru Ishiba on April 7, President Trump selected two cabinet officials to begin bilateral trade discussions with Japan. Japan was hit with a 24% reciprocal tax across the board, which is set to go into effect on April 9, as well as a 25% levy on auto imports.

The sudden escalation in trade tensions has reignited fears of a global supply chain disruption, particularly for Japanese automakers and electronics firms that rely heavily on exports. Analysts warn that prolonged tariffs could dent Japan’s economic recovery, which had shown signs of stabilization earlier this year. Meanwhile, the yen’s sharp appreciation—a typical safe-haven response—has added further pressure on exporters, complicating the Bank of Japan’s efforts to maintain monetary stimulus.

Seoul's Kospi index surged 0.9%, while Australia's S&P/ASX200 index increased 0.8%. Singapore's Straits Times Index (STI) was down 2.1% at 9.31am, reversing a 0.6% advance just after trading began. The STI fell 7.5% the previous day, its worst loss since the 2008 global financial crisis.

The steep decline in Singapore’s market reflects broader anxieties over the city-state’s exposure to global trade flows, given its status as a key financial and shipping hub. Banking stocks, which make up a significant portion of the STI, were among the hardest hit as investors priced in risks of slower loan growth and rising credit defaults in a tariff-hit economy.

Hong Kong stocks increased 2.4%, recovering some of the enormous losses incurred the day before, when the Hang Seng Index fell 13.2%. China's Shanghai Composite climbed by only 0.4% after Mr Trump threatened to impose further 50% tariffs on China.

In response, China pledged on April 8 to "fight until the end" if the US imposed fresh taxes. In the same statement, China's Ministry of Commerce urged discussion to settle concerns.

Market participants are closely watching Beijing’s next moves, including potential retaliatory measures such as restrictions on rare earth exports or further devaluation of the yuan. However, some analysts caution that China may opt for a more measured response to avoid destabilizing its own financial markets, which have already been rattled by the ongoing US-China tech cold war.

"For the time being, it appears that news out of Washington will continue to drive market swings, one way or the other," said Chris Larkin of Morgan Stanley's E*Trade brokerage. "Some of the market's notable lows over the past few decades have been preceded by similar levels of volatility, although it's always impossible to know when prices will eventually find their bottom."

Despite outreach from trading partners eager to avoid the levies, the US president indicated that he was open to certain conversations but would not contemplate pausing his plan to impose more tariffs on dozens of countries.

Behind the scenes, US Treasury officials have reportedly been urging moderation, fearing that an all-out trade war could derail the fragile post-pandemic recovery. However, Trump’s unpredictable rhetoric suggests internal divisions within the administration, leaving investors uncertain whether a compromise is imminent or if further escalation is inevitable.

US market futures gained following a three-day decline. S&P 500 futures were up 0.9%, while Nasdaq futures were up roughly 1%. Dow futures rose 444 points, or about 1.2 percent. Overnight, fears of an economic slowdown led to significant swings in US markets, with the S&P 500 index approaching a bear market before finishing marginally.

Mr Trump and his advisers' often contradictory pronouncements highlighted the chaotic approach that has perplexed markets, as well as the difficulty that even the US' staunchest allies face when negotiating with Trump.

Stocks, bonds, and commodities all swung dramatically on April 7, as markets tried to process a rush of news about Trump's objectives. In the most peculiar example, an incorrect report regarding the president's willingness to contemplate a tariff delay temporarily boosted US equities on April 7 before the White House rejected it as "fake news."

"We should see a strong bounce at some point soon, but the process of repricing the market to its realistic economic outlook will take time," Matt Maley, who works with Miller Tabak, said. "There will be plenty of time to get aggressive when it becomes more evident that the worst of the decline is behind us." In commodities, oil gained on April 8 after tumbling to a four-year low in its previous session. Gold was little changed.