Morning Bid: Bond rates fall as US GDP worries and Tech Collapse Escalate

Is the US economy starting to turn over? The combination of recent data disappointments, rising trade tensions, and sharp asset market movements implies that investors are beginning to consider such a scenario. On Tuesday, Treasury Secretary Scott Bessent cautioned that the economy may be more “brittle” beneath the surface than headline figures suggest.

If this is the case, Asian and developing markets will face a challenging ride, regardless of how their home economies perform. The broad stock market slump in these nations on Tuesday, with MSCI’s Asia ex-Japan and emerging indexes, as well as Chinese and Japanese benchmarks, all falling by more than 1%, indicates this direction.

According to U.S. data released on Tuesday, consumer confidence fell the most in three and a half years in February, while inflation expectations increased, the latest in a spate of measures that have recently raised warning flags, including retail sales and business activity indexes. The two-year Treasury yield plummeted to its lowest level before November’s US presidential election, while the 10-year yield fell about 10 basis points. Rate futures markets are now pricing in at least two more quarter-point Fed reductions this year, beginning in July. Lower Treasury rates and a lower dollar are frequently used to boost Asian and developing markets, but not when they are depressed by concerns about slowing growth and more experts advise customers to reduce their risk exposure.

Wall Street closed unevenly on Tuesday, with the Nasdaq down more than 1% as the ‘Magnificent Seven’ firms, the unchallenged market rulers for the past two years, fell dramatically again. The ‘Mag 7’ is now down 13% from its December peak, placing it in the ‘correction’ zone. It’s worth mentioning that they were in bear market territory last summer, down more than 20% in only a month, demonstrating incredible resiliency. Can they rebound and boost the rest of the market once again? Perhaps, but Nvidia’s results will be critical after the market closes on Wednesday. Most assets sank on Tuesday, save for bonds and a few noteworthy currencies, as investors cashed in on even winning wagers.

Gold, a classic safe-haven asset, declined 1.5%, while bitcoin dropped 6% and oil plunged 3% On Wednesday, Asia’s schedule features Taiwan’s GDP, Australian inflation, Singapore’s industrial production, and Thailand’s interest rate decision. According to a Reuters poll, the Bank of Thailand is anticipated to keep its benchmark interest rate at 2.25% and decrease it just once this year to maintain a policy buffer in the face of rising global uncertainty. Swap markets are pricing in 50 basis points of reduction this year.