After three days of significant global market turmoil reminiscent of the early Covid-19 pandemic, stocks showed signs of recovery on Tuesday, despite ongoing trade tensions stemming from President Trump’s tariffs.
The S&P 500 index rose over 3 percent in early trading, recovering some losses after a steep decline that nearly brought it into bear market territory on Monday. The index remains approximately 15 percent below its level prior to the announcement of new tariffs on major U.S. trading partners last week.
Prior to the opening of markets in China, the government implemented measures aimed at stabilizing stock prices. Consequently, share prices in Hong Kong rebounded by about 1.5 percent after a 13.2 percent drop the previous day, while mainland China also saw gains.
Japanese stocks increased by 6 percent, recovering some of the losses from earlier days. However, markets in Taiwan continued to decline, prompting the finance ministry to announce the activation of a $15 billion stabilization fund to support the markets.
The Stoxx Europe 600 index rose by 3 percent, with nearly all major markets in the region experiencing gains. Despite this, the pan-European benchmark remains about 15 percent lower than its peak in early March.
Stéphane Boujnah, CEO of Euronext, noted that the disruptions caused by tariffs have rendered U.S. markets “unrecognizable” to investors, leading some to shift their investments to Europe.
Global markets were unsettled last week following Trump’s announcement of broad new tariffs, including a 10 percent base tax on American imports and significantly higher rates on goods from numerous countries. In response, several countries have implemented their own tariffs on U.S. goods or threatened retaliation, with China matching a new 34 percent tariff on many American imports.
Concerns among business leaders and analysts are growing regarding the potential long-term impact of escalating trade tensions on the global economy, with some economists predicting a recession later this year.
Jane Fraser, CEO of Citigroup, indicated in a memo that discussions in Washington and Mexico focused on the urgency of the current situation. She suggested that while tariffs may eventually be negotiated down, businesses should prepare for a fundamental shift in trade and capital flows.
A recent survey of small businesses in the U.S. revealed a decline in confidence for the third consecutive month, with a notable decrease in the number of owners expecting improved conditions.
Economic growth concerns have also affected oil prices, with Brent crude trading around $65 a barrel, down from over $80 three months ago.
The S&P 500 experienced its worst two-day decline since the onset of the pandemic, dropping 10.5 percent on Thursday and Friday.
As new higher-rate tariffs are set to take effect on Wednesday, Trump has maintained a firm stance on trade, issuing an ultimatum to China to rescind its retaliatory tariffs or face additional tariffs of 50 percent starting Wednesday.
Scott Bessent, U.S. Treasury Secretary, stated in a CNBC interview that China is making a “big mistake” and is playing a “losing hand,” following China’s refusal to relent.
In response to the market instability, several government departments and state-owned enterprises in China pledged to ensure the smooth operation of the capital market. The People’s Bank of China committed to supporting Central Huijin Investment, which announced plans to increase its holdings of stock funds.
Additionally, numerous companies, many state-owned, declared share buybacks, a strategy typically aimed at boosting stock prices.
These actions by China’s “national team” echo previous interventions during a market crisis in 2015, where government efforts to stabilize prices followed missteps in market management. This time, however, the intervention aligns with a broader strategy by Chinese leader Xi Jinping to position the government as a stabilizing force amid global economic uncertainty.
The effectiveness of Beijing’s measures remains uncertain, as past market meltdowns were often driven by a loss of investor confidence. Experts suggest that the current situation may involve deeper economic implications beyond mere market psychology.