Recession fears mount, investors spooked as tariff man Donald Trump ghosts spotlight

The Australian sharemarket shed $25 billion dollars as nervous investors followed Wall Street’s $US4 trillion selldown over recession fears, but a late afternoon revival has eased investor losses.

In morning trading the All Ordinaries has fallen 1.9 per cent and the ASX 200 dropped 1.8 per cent to hit a seven-month low before recovering to end the day down 1.1 per cent for the All Ords and 0.9 per cent for the ASX 200.

The ASX is now down 9 per cent from its record high in February.

The day’s trading started in a frenzy, with investors increasingly concerned that the tariff policy of the Trump administration would cause a recession.

Over the weekend, President Trump was asked by Fox News if he was worried about a recession, but replied he would “hate to predict something like that”. Instead, he said the country was in a “period of transition”.

Comments from US Treasury Secretary, Scott Bessent, that “there’s going to be a detox period,” when asked about economic data, suggested that any stock market fall would not be supported by any government support.

As investors digested that news, the Dow Jones Industrial Average dropped 2.1 per cent, the S&P 500 shed 2.7 per cent and the Nasdaq Composite tracked for its worst day in more than two years, falling 4 per cent.

The so-called MAG-7, including Tesla and NVIDIA were particulary hard hit, with Tesla dropping 15 per cent. Mag-7 shares shed $US760b in market cap to be more than 20 per cent down from its December high.

Australian tech stocks with US exposure were in the firing line early, losing 4 per cent for the day. Hardest hit were names like family tracking company Life360 which fell 8.7 per cent, accounting software firm Xero, down 5 per cent and consulting firm TechnologyOne which dropped 5.7 per cent.

But the selloff also hit industrials like Brickworks which manufactures a range of building products in Australia and North America, falling 7 per cent, and BluesScope Steel which fell 1.6 per cent on fears a US recession would hit the construction industry.

A US slowdown was also on the mind of Qantas investors, who sold the stock down by 9 per cent. The fall was prompted by US airline Delta slashing its first-quarter earnings and revenue guidance, citing reduced confidence from both consumers and businesses amid “increased macro uncertainty.” Delta shares fell 13 per cent on the news.

The carnage wasn’t limited to Australian markets. Asian markets also fell to a five-week low Tuesday, with Japan’s Nikkei down as much as 2.75 per cent, the Hong Kong based Hang Seng index down 0.76 per cent. There were also falls in South Korea and Taiwan.

In early trading it looked as if the rout in US shares would continue, with futures markets showing another 1 per cent fall but expectations switched in the afternoon to tip a mild rise for the S&P 500 and the NASDAQ.

There appears to still be appetite to “buy the dip” in US shares, in the hope of continuing to enjoy gains under a Trump presidency.

“There’s chatter about when it might be safe for investors to come out from beneath the covers. While uncertainty regarding US President Trump’s trade policy persists and the President continues his apathy towards economic activity and the stock market, market sentiment will remain skittish,” Capital.com senior financial market analyst Kyle Rodda said.

Cryptocurrencies were also knocked heavily, with Bitcoin dropping 2.4 per cent and Ethereum losing 8 per cent. Despite their intention to be a hedge in times of volatility, cryptocurrencies continue to act wildly in times of uncertainty. Since hitting a record high of $171,000 in January, Bitcoin has now fallen 27 per cent.

Gold remained relatively unchanged throughout day.

Of the few bright spots on the trading floor were utilities, which are often seen as safe havens in times of a slowdown because of their consistent earnings.

Electricity infrastructure provider APA rose 1.9 per cent and electricity generator Meridian was up 5.2 per cent.

Banks were mixed. Commonwealth Bank fell as much as 2 per cent in early trading to recover to be down 0.5 per cent, while NAB, ANZ and Westpac all rose.

Looking forward, the picture will continue to be unclear until there is some surety about both Mr Trump’s tariff policies and the anticipated reduction in US government spending.

US investment JPMorgan Chase said on Monday that the risk of a recession had grown to 40 per cent from 30 per cent due to “extreme US policies”, while Goldman Sachs’ economists raised their 12-month recession odds to 20 per cent from 15 per cent.