Global Markets Stabilise After Wall Street Sell-Off Amid Economic Fears

Stocks Rebound as Investors Weigh US Economic Outlook

Global markets showed signs of stabilisation on Tuesday after a sharp sell-off on Wall Street raised concerns over the US economy and trade policies. While Asian and European stocks initially followed the US market downturn, signs of recovery emerged as investors reassessed economic risks.

Futures for the S&P 500 and Nasdaq 100 indicated a modest 0.4% and 0.5% rebound, while Europe’s Stoxx 600 slipped 0.1% and Germany’s DAX gained 0.6%. The Nasdaq Composite had fallen 4% on Monday, marking its worst day in over two years, with the S&P 500 down 2.7%.

Despite investor fears, analysts argue that recession concerns are overblown, pointing to strong US economic data and corporate earnings.

Why Are Markets Reacting This Way?

The recent sell-off was driven by:

• Uncertainty over US trade policies – President Donald Trump’s erratic tariff measures continue to disrupt investor confidence.
• Tech stock corrections – After a year of massive gains, investors took profits, leading to a broader market pullback.
• Concerns over a global slowdown – Analysts worry about the impact of protectionist policies on consumption and investment.

However, economic fundamentals remain solid, with analysts dismissing the likelihood of a US recession.

European and Asian Markets Show Mixed Reactions

European stocks remained relatively steady, buoyed by Germany’s new infrastructure and military spending plans. Defence stocks such as Rheinmetall (+2.6%) and Leonardo (+1.9%) gained, while infrastructure companies like Schneider Electric rose nearly 3%.

Asian markets opened lower but recovered some losses:

• Japan’s Nikkei 225 fell 0.6%, while the Topix index dropped 1.1%.
• China’s CSI 300 rose 0.3%, showing resilience amid global uncertainty.
• South Korea’s Samsung Heavy Industries slid 2.1%, and Taiwan’s TSMC lost 2.7%, as tech stocks faced volatility.

Commodities and Currency Movements

• US Treasury yields stabilised, with the 10-year yield at 4.21%.
• The US dollar weakened, falling 0.6% against major currencies and down 4.8% this year.
• Brent crude oil edged up 0.5% to $69.64 per barrel, recovering from Monday’s decline.
• Gold rose 0.7% to $2,909 per ounce, as investors sought safe-haven assets.

Will US Markets Recover This Year?

Despite short-term volatility, market experts remain optimistic about a US recovery later in 2025. Key reasons include:

• Strong corporate earnings – Tech stocks may have corrected, but long-term growth remains intact.
• Economic resilience – The US economy continues to expand, with solid job numbers and consumer spending.
• Policy clarity – If trade tensions ease, markets could rally in the second half of the year.

While volatility will persist, investors are likely to return to risk assets as confidence in the US economy strengthens. By late 2025, we could see a market rebound driven by improving global trade and economic stability.

Source: (FT.com)