Fears over the future health of the economy continued to rattle markets around the world, as investors tried to puzzle through President Trump’s commitment to tariffs in spite of the potential fallout his policies could have for inflation, consumer spending and overall growth.
After the S&P 500 suffered its worst day of the year on Monday, stocks were mixed on Tuesday. European markets found their feet and an initial sell-off in Asia moderated.
Indexes in France and Germany were higher, and the euro gained on the dollar. Investors were buoyed by signs that European governments were poised to significantly increase spending on defense, as Mr. Trump has signaled waning U.S. support for security in Europe.
Earlier, Asia markets fell sharply before recovering some losses later in the day. Indexes in Japan, South Korea and Taiwan finished more than 1 percent lower, weighed down by declines in technology stocks. Equity markets in China edged higher.
Futures for the S&P 500 index were slightly higher in the hours before official trading begins in New York. The big technology companies that dragged down the index on Monday were mixed in premarket trading.
Tesla, which posted its worst decline in years on Monday, regained some ground. Mr. Trump took note of the market turmoil, expressing confidence in Elon Musk, the carmaker’s chief executive and a key White House adviser, on social media. He pledged to buy “a brand new Tesla” on Tuesday morning.
Airline stocks sank on Tuesday after Delta Air Lines issued a warning about a worsening economy. The airline announced late on Monday that it had cut its profit forecast for the first three months of the year, saying that rising concern among consumers was denting demand for air travel.
Delta’s stock was down more than 10 percent in premarket trading. Airlines in Europe, like Germany’s Lufthansa and the parent of British Airways, and Asia, like Korean Air, also posted notable declines.
Investors have become increasingly cautious in recent weeks as Mr. Trump has flip-flopped on tariffs, causing confusion and uncertainty.
Growing unease about the inflationary effects of the tariffs, coupled with a darkening mood about the economy, provided the catalyst for a sell-off in a market that investors have long worried was overvalued.
While current economic data has remained robust, surveys of consumers, business leaders and economists are growing pessimistic. Analysts at JPMorgan now say there is a 40 percent chance for a global recession.
The sell-off highlighted how carefully global markets are parsing the president’s public remarks about the economy.
Analysts pointed to Mr. Trump’s comments from an interview that aired on Sunday when he refused to rule out the possibility of a recession, stating that the economy is undergoing “a period of transition.” The Trump administration has offered little to assuage investors’ fears, continuing to drive a hard line on tariffs on the major U.S. trading partners Canada, Mexico and China.
In a research note on Tuesday, Takahide Kiuchi, executive economist at Nomura Research Institute, said financial markets were caught off-guard by Mr. Trump’s “unwavering” commitment to push ahead with tariffs despite the economic pain that it might cause.
“Even if the tariffs lead to inflation and economic deterioration, President Trump is likely to place the blame squarely on former President Biden rather than acknowledge any shortcomings in his own economic policies,” Mr. Kiuchi wrote.
In a recent note, Goldman Sachs said the stocks making up the main equity indexes in Taiwan, South Korea and Japan would be the most exposed in Asia if the Trump administration imposed a universal tariff on trading partners.
Technology shares declined in Japan on Tuesday, with Sony, SoftBank, Hitachi and Fujitsu each falling more than 2 percent. The Taiwanese chip giant TSMC and the Apple supplier Foxconn were both down more than 2 percent.
Shares of Japanese automaker Toyota Motor fell nearly 3 percent, while South Korean automaker Hyundai Motor dipped slightly. Japanese and South Korean automakers are expected to be particularly damaged by a potential 25 percent tariff on foreign cars that Mr. Trump has indicated could take effect as soon as April 2.
Bruce Pang, an adjunct associate professor at the Chinese University of Hong Kong business school, said Chinese markets are moving out of step with the United States and other global counterparts. Chinese shares are getting a lift from the government’s ambitious target of around 5 percent growth and recent business-friendly comments about supporting the private sector and entrepreneurship from top leaders.
“These factors collectively help mitigate the headwinds arising from the Trump administration’s news flows,” he said.
In the year to date, shares of Chinese companies listed on the Hong Kong Stock Exchange have risen about 20 percent, compared with a 4 percent slide on the S&P 500.
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