By Wayne Cole

Asian Stocks Struggle Amid U.S. Asset Flight

SYDNEY (Reuters) – Asian stocks battled to hold ground on Tuesday after a furious flight from U.S. assets undermined Wall Street and the dollar, while concerns about the independence of the Federal Reserve piled fresh pressure on Treasuries.

Relatively limited losses in Asia sparked talk of funds reallocating money to equities in the area, though tariffs on economic growth remained a major drag.

President Donald Trump’s increasingly vocal attacks on Fed Chair Jerome Powell for not cutting interest rates led to a 2.4% drop in Wall Street indexes on Monday, and the dollar hit three-year lows.

> “The ’sell America’ trade was in full flight,” said Tapas Strickland, head of market economics at NAB.
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> “Whether or not President Trump is legally able and willing to move against the Fed, the jousting underscores the loss of U.S. exceptionalism and the very real policy risk for investors.”

The selling abated somewhat in Asia, allowing S&P 500 futures to bounce 0.3% and Nasdaq futures 0.4%.

Earnings Week Ahead

The market faces another test from earnings this week, with 27% of the S&P 500 set to report. Tesla (NASDAQ: TSLA) is due later in the session, having already shed almost 6% on Monday due to reports of production delays.

Other companies reporting this week include Alphabet (NASDAQ: GOOGL) and prominent industrials like Boeing (NYSE: BA), Northrop Grumman (NYSE: NOC), Lockheed Martin (NYSE: LMT), and 3M.

The fallout from Wall Street only saw Japan’s Nikkei ease a slim 0.2%, while MSCI’s broadest index of Asia-Pacific shares outside Japan held steady. Chinese blue chips added 0.2% as Beijing warned other countries against striking trade deals with the U.S. at China’s expense.

European Market Impact

European shares also saw restrained losses, with futures for the EUROSTOXX 50 and DAX down 0.5%, and FTSE futures off 0.1%.

Losing Faith in U.S. Assets

Yields on U.S. 10-year notes edged up to 4.43% on fears the White House might seek to replace Powell with someone more inclined to cut rates, while inflation was being pushed up by Trump’s punitive tariffs.

There was concern that the current Fed might be hesitant to ease policy to avoid perceived political pressure.

Amidst White House discussions on various trade deals, a quick resolution seemed unlikely. Analysts at JPMorgan noted that average trade deals take 18 months to negotiate and 45 months to implement.

> “We reiterate our view that if current policies do not change, then the probability of a U.S. recession in 2025 is 90%,” they stated in a note.

The loss of confidence in U.S. assets significantly affected the dollar, which touched its lowest level since March 2022 against a basket of currencies at 97.923 on Monday.

The currency reached a decade-low against the Swiss franc at 0.8042, while the euro rose above $1.1500 to $1.1538. The dollar hit a seven-month low against the yen at 139.92, on track to test a low from last September at 139.58.

> “The independence of the Federal Reserve is a cornerstone of the dollar’s credibility,” noted Quasar Elizundia, a research strategist at Pepperstone.
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> “The dollar’s status as the ultimate safe-haven asset can no longer be taken for granted; it is being actively challenged.”

The dollar’s weakness, combined with demand for physical safe havens, helped gold reach a record price above $3,485 an ounce.

Oil prices are contrasting as concerns about a global slowdown clash with the prospect of increased supply from OPEC. Brent rose 45 cents to $66.70 a barrel, while U.S. crude added 65 cents to $63.73 per barrel.