Risk-Aversion Heighten: Stock Markets Slumps, Yen Gains

Trump’s Remarks on Recession

Concerns over a potential recession, fueled by President Trump’s recent comments and ongoing trade tensions, have heightened market volatility. In a recent interview, Trump acknowledged the possibility of an economic downturn, describing the current climate as a “period of transition.”

During the recorded interview, Trump defended his unconventional tariff policies on allies and his aggressive push to cut the federal workforce. When asked about rising fears of an economic slowdown, he did not rule out a recession or the potential short-term disruptions associated with his economic agenda.

“There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing”, Trump stated.

Trade War 2.0 Ahead?

The Trump administration’s new tariffs on imports from China, Canada, and Mexico have escalated trade tensions, prompted retaliatory measures and contributed to market instability.

In response, China has imposed retaliatory tariffs on U.S. imports, while Canada and Mexico are also considering similar actions. This raises concerns of an intensifying trade war, adding further uncertainty to global markets.

Risk-Aversion: US Stock Slumps, Yen Gains as Safe-haven

The S&P 500 and Nasdaq Index saw sharp declines yesterday, with the Nasdaq recording its biggest one-day drop since September 2022.

(CBOE Volatility Index (VIX), Source: Trading View)

The S&P Volatility Index (VIX) spiked to a 7-month high above 25 points, signaling heightened market uncertainty and reflecting growing risk-off sentiment, increasing the likelihood of further market sell-offs.

In the currency market, the Japanese Yen, widely regarded as a safe-haven asset, continued to appreciate amid heightened global uncertainty. The unwinding of yen-funded carry trades has fuelled capital inflows into the currency. Additionally, expectations of tighter monetary policy from the Bank of Japan (BoJ) have further supported the yen’s gains.

Technical Outlook: Nasdaq100 Futures, USDJPY

Nasdaq 100 Loses 20,000 Mark

(Nasdaq 100 Futures, Daily Chart; Source: TradingView)

Nasdaq 100 futures have fallen below the key 20,000 level, erasing all post-election gains from the “Trump Rally.” The formation of a double top pattern, coupled with the breakdown of this psychological level, suggests that Nasdaq 100 has now entered a bear market.

USDJPY: Entering Below 150 Era?

(USDJPY, Daily Chart; Source: TradingView)

USDJPY has extended its two-month downtrend from the 158.00 high, with the pair now losing ground below 150.00.

A sustained move under this level could indicate further downside potential, especially if risk-aversion sentiment persists. The unwinding of carry trades and yen’s role as a funding currency may further accelerate the yen’s appreciation.

Disclaimer

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