(Bloomberg) -- US equity futures signaled a rebound from sharp declines on Monday spurred by concerns over President Donald Trump’s latest criticism of the Federal Reserve and the outlook for the American economy.
Contracts for the S&P 500 and the Nasdaq 100 gained 1% after the underlying gauges slumped more than 2% in Monday’s session. Europe’s Stoxx 600 index dropped as traders returned from the Easter break, while Asian equities were little changed. An index of the dollar’s strength steadied after weakening to a 15-month low.
While there were some signs of recovery in demand for riskier assets, investors were still attracted to havens, with gold surging to a fresh record, while the yen strengthened beyond 140 per dollar for the first time since September.
Investors are wading through a slew of headlines on tariff talks after Trump ratcheted up his global trade war this month by imposing the highest levies in a century. Concerns Trump may be preparing to fire Fed Chair Jerome Powell have increased unease among traders, who are looking ahead to earnings from Tesla Inc. and Alphabet Inc. this week for clues on how companies are navigating this new environment.
Trump’s tirades have forced a reappraisal of the assets fundamental to US economic dominance. The dollar and Treasuries, traditional havens at times of stress, suddenly look much less appealing. Investors are also weighing Trump’s warning that the US economy may slow if the Federal Reserve does not immediately reduce interest rates.
“With increasing rhetoric from the administration admonishing the Fed to cut rates and the markets entertaining intensifying discussions about the possibility of replacing the Fed chair, we don’t expect a rush back into the market from abroad,” John Velis, a strategist at Bank of New York Mellon, said of US bonds. “The haven status of such assets is increasingly in question.”
The greenback was mixed against Group-of-10 peers Tuesday, while the yen outperformed, with the Bank of Japan said to be on course to keep raising rates. Meanwhile, China let the yuan weaken against almost all major currencies to support its economy as the trade war with the US deepens.
“Market volatility though is driving some haven flow into the yen,” said Shoki Omori, chief desk strategist at Mizuho Securities Co. in Tokyo. “Reports the BOJ sees little need to change their stance on rate hikes are also aiding sentiment in the currency, while denting the dollar.”
In a sign that nations are attempting to navigate the tussle between the US and China, a high-level Japanese delegation will deliver a letter from Prime Minister Shigeru Ishiba to Chinese leader Xi Jinping this week. Beijing earlier warned nations against making agreements with Washington that hurt China.
Japan’s finance minister Katsunobu Kato said his administration is in touch with other nations on how best to convey widely-shared concerns about the impact of tariffs during meetings in Washington this week. Prime Minister Ishiba said on Monday that Japan won’t just keep conceding to US demands to reach a deal over tariffs, contrary to how Trump had portrayed the talks.
The US said it’s made “significant progress” toward a bilateral trade deal following talks between Vice President JD Vance and Indian Prime Minister Narendra Modi on Monday. Thailand, which is seeking a reprieve from Trump’s plan to levy a 36% tariff on its goods, said ministerial level talks previously scheduled for this week have been delayed.
“Optimism appears to be fading, with markets potentially beginning to price for a less favorable outcome” in tariff talks, wrote Jun Rong Yeap, market strategist at IG Asia. “Talks are likely to drag on for longer.”
Amid the uncertainty, investors are piling into gold, with the precious metal topping $3,500 an ounce following a 2.9% surge on Monday.
Some of the main moves in markets:
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This story was produced with the assistance of Bloomberg Automation.
--With assistance from Abhishek Vishnoi, Joanne Wong and Robert Brand.