(Bloomberg) — Asian stocks fell after President Donald Trump’s move to curb Chinese investments and proceed with tariffs on Canada and Mexico prompted investors to trim risky bets. A decline in US stocks at the end of trading also hurt sentiment.
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Equity indexes in Hong Kong and mainland China dropped at the open and a regional gauge of shares fell for a second consecutive day. The yield on 10-year Treasuries slid two basis point to 4.4% in early Asian trading while gold touched a record Monday on demand for safe havens.
Sentiment in the broader market soured after Trump rolled out a memorandum telling a key government committee to curb Chinese spending on tech, energy and other strategic American sectors. That’s threatening to undo a rally in Chinese technology shares after optimism over DeepSeek and President Xi Jinping’s meeting with corporate leaders including Alibaba’s Jack Ma, had sent a key gauge to a three-year high.
Trump laid out the plan in a national security presidential memorandum signed Friday that commits to using “all necessary legal instruments” to bar Chinese affiliates from investing in US technology, critical infrastructure, health care, agriculture, energy, raw materials and other industries.
The directive sets the stage for a more muscular use of CFIUS, a secretive panel that scrutinizes proposals by foreign entities to buy US companies or property, to thwart Chinese investment.
“Trump’s directive to limit Chinese spending and investment in strategic US sectors has been the trigger for a solid reduction in extended longs and this will spill over in the HK equity cash open,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. “The key aspect will then be how China/Asia-based traders act after the initial weakness.”
A gauge of Chinese shares in Hong Kong tumbled 2.8% while Alibaba Group Holding Ltd. slumped as much as 7.9% in Hong Kong trading. The company’s American depositary receipts fell 10%, the biggest decline since October 2022.
In Japan, trading houses, including Mitsubishi Corp. and Marubeni Corp., rallied on Tuesday after Berkshire Hathaway Inc. said it was looking to increase ownership in the companies in an annual letter to shareholders dated Saturday.
In other parts of Asia, the Bank of Korea cut its seven-day repurchase rate by a quarter-percentage point to 2.75% on Tuesday in a widely expected move.
Trump also deepened Washington’s split with allies over Ukraine, withdrawing US condemnation of Russia’s 2022 invasion at the United Nations and among Group of Seven countries as he aims to end the war on terms agreeable to Moscow.
The US president also said tariffs scheduled to hit Canada and Mexico next month were “on time” and “moving along very rapidly” following an initial delay.
“This could be a key week for a stock market that’s mostly been trading sideways for more than two months,” said Chris Larkin at E*Trade from Morgan Stanley.
A slide in most megacaps hit the final stretch of US trading as the S&P 500 dropped 0.5%, the Nasdaq 100 lost more than 1%, and the Dow Jones Industrial Average wavered. Just days before Nvidia Corp.’s results, hedge funds’ net exposure to “Magnificent Seven” stocks hit the lowest since April 2023. The chipmaker lost 3.1%.
US investors have started to boost bets that volatility will come back as Nvidia’s earnings on Wednesday could be the first in a whirlwind of events. The US benchmark has gone more than 30 sessions without posting consecutive declines of more than 1%.
“The market is churning sideways, driven by investor confusion, a natural consolidation period following recent gains, and seasonal weakness in February,” said Mark Hackett at Nationwide. “However, the strong macro backdrop, robust earnings, and healthy fund flows argue for a breakout to the upside once momentum returns.”
Meantime, the Federal Reserve’s preferred inflation gauge is expected to cool to the slowest since June, but glacial progress on taming prices will keep officials cautious. The data is due Friday.
“If we see blowout earnings from Nvidia and softer-than-expected inflation data, that could add upward momentum to stocks,” said Clark Bellin at Bellwether Wealth.
In other markets, oil edged higher in a largely aimless session amid a slew of geopolitical uncertainties, including Russia-Ukraine peace talks and a possible increase in Iraqi crude production. Gold held near its latest record, as exchange-traded funds backed by the precious metal draw renewed interest from investors.
Key events this week:
US consumer confidence, Tuesday
Fed’s Lorie Logan, Tom Barkin, Michael Barr speak, Tuesday
Apple shareholder meeting, Tuesday
US new home sales, Wednesday
Nvidia earnings, Wednesday
Fed’s Raphael Bostic speaks, Wednesday
Eurozone consumer confidence, Thursday
US GDP, durable goods, initial jobless claims, Thursday
Fed’s Jeff Schmid, Beth Hammack, Patrick Harker, Michael Barr, Michelle Bowman speak, Thursday
Japan Tokyo CPI, industrial production, retail sales, Friday
US PCE inflation, income and spending, Friday
Fed’s Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.2% as of 10:10 a.m. Tokyo time
Japan’s Topix fell 0.4%
Australia’s S&P/ASX 200 fell 0.8%
Euro Stoxx 50 futures fell 0.4%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0464
The Japanese yen fell 0.3% to 150.21 per dollar
The offshore yuan was little changed at 7.2582 per dollar
Cryptocurrencies
Bitcoin fell 2.7% to $91,411.92
Ether fell 6% to $2,479.06
Bonds
The yield on 10-year Treasuries declined two basis points to 4.38%
Japan’s 10-year yield declined 3.5 basis points to 1.385%
Australia’s 10-year yield declined four basis points to 4.40%
Commodities
This story was produced with the assistance of Bloomberg Automation.
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