Ten days that shook the financial markets
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The pain, said Shuntaro Takeuchi, was 10 out of 10.
Not because of the Japanese actions portfolio he ruled by Palo Alto, California, but because of his appendix.
They had to cut it just when his Matthews Asia colleagues included him in a conference conversation to draw how to manage assets worth $ 7 billion through the deepening market collapse.
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« I was in the conversation two minutes before the surgery, » Takeuchi recalls. « The nurse asked, » Do you really have to attend this? « In Tokyo, the Nikkei Index at that time was on Wednesday to fall by 4%, and in the end trillions dollars were deleted from the estimated global shares, and the trade ended with the largest dollars from all registered crashes on the market.
The 10 days of trade, since US President Donald Trump hit automakers with duties, have caused the strongest convulsions from the pandemic panic in 2020. The sale of US government bonds-the main secure asset in the world markets-has been the worst of decades, as if to emphasize how much the foundations were shaken.
The collapse began on the eve of what Trump called « Liberation Day. »
- On April 2, he lifted the highest wall of the US economy myth for a hundred years with a total rate of 10% on imports and even higher rates for individual trading partners.
- Next week, this became an open economic conflict with China, which was almost under the US trade embargo by Friday, as duties increased to 145%.
More than $ 5 trillion dollars market value has disappeared from the MSCI Index for all countries during a trade that looked more like a horror roller coaster April 2. This revealed how unprepared the investors are about Trump’s aggressiveness and that its unpredictability and twists and turns are at risk of harming the United States in the center of the financial universe.
« We had a breakdown of confidence and we do not know what the secondary effects of the fall on the market, » said Jeff Wilson, a veteran fund manager in Australia. « Some hedge funds may have gone bankrupt, there may be other consequences that will only become clear in the next few weeks. » His funds mostly bought in the bustle.
- Initially, the sale epicenter affected all kinds of exposure to economic growth -bars, industrial metals and companies such as Apple with supply chains heavily tied to China.
- Then, just before sunset on April 4 in Beijing, on the day to clean the tombs – a national holiday to pay tribute to the ancestors, China avenged and imposed a 34% duty on US imports.
- The oil fell to a four -year bottom and the main global index in the stock market exceeded the threshold for what the types of markets call « correction » – a decline of 10% or more than the last peak.
- Even gold, regarded as a refuge in times of turmoil, began to collapse, a sinister sign, as investors who were confronted with demands to maintain a margin were forced to sell their most secure assets to significant losses.
For Wong Cock Hoi, founder and CEO of APS Asset Management in Singapore, this is a scenario that has been anxious for years. « Obviously, in my wildest dreams, I did not imagine that customs rates could rise to 125%, » he said, after they increased even more in the eye-to-eye principle.
« In principle, the trade between the two largest economies in the world will stop. »
With convenient investment, he has positioned himself in sector sectors, artificial intelligence and biotechnology in China. According to him, his portfolio has grown by about 20% since the beginning of the year.
- Wall Street bankers joined global conference meetings and tried to calm the annoyed customers.
- There were hopes last weekend that Trump would retreat before the duties actually hit.
- But returning from the golf weekend, reporters asked him on Sunday aboard Air Force One for the markets and he replied that « sometimes a medicine should be taken. »
This opened the gateways.
- NASDAQ 100 futures soon fell by more than 5%, and a dive of 8% of Nikkei triggered the mechanism for temporary termination of trade. Then they continued to fall.
- The CBOE variability index, called the Wall Street « Fear Meter », has jumped over 60 – level, which is usually observed during collapses such as 2020 or the 2008 financial crisis.
- The S&P 500 ended the day with 17% below the record peak, which had reached only seven weeks earlier.
Christopher Forbes, the head of Asia at CMC Markets, said Friday and Monday were the days with the largest volume of trade in history.
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So, in addition to the rush of surgery, he was trying to make sure that his portfolio was as secure as possible. « We traded, » he said, buying and selling when the shares on his surveillance list reached the target levels mainly for limited exposure companies to the United States, but does he not want to bet on sectors or how Trump’s trade war would end.
« I don’t want to be too dramatic. What we do is not to panic, to control the risk and to focus on choosing stocks. »
For months, the currency markets were expected, as a means of global trade, to be on the first line for price adjustments when duties were announced. Instead, the shock came from the bonds. Shortly after the duties came into force in the middle of the night in New York, a massive wave of sales struck debt bonds in Asia on Wednesday.
| The income, which usually changes with small moves, as the market is liquidity and deep – they have increased hell and unleashed the most moniac (so far) phase of quakes in the markets along the duties. The yield of 10-year government bonds has jumped with almost 20 basic points in two hours, which traders have accepted as a signal or somewhere on the market someone is forced to sell, or, which is more worrying, that US bonds are questioned as a safe asylum. |
But within hours the markets were hit again. Trump has stunned the world by pausing the heavier bilateral duties, retaining the total 10% rate on imports and raising that again on China. The shares rose sharply, marking some of the biggest profits in a percentage since 2008, but with so much uncertain uncertainty, they began to hesitate again.
Martin Watton, head of the Westpac Financial Market Strategy and a 30-year-old veteran on the markets in Sydney and London, said the Fixed Income Trade on Wednesday has no historical precedent. « Well, it is scared and acts as a sharp warning that the jump is not because of the search for security in providing US dollars funding, buying government bonds and just US dollars, » he said.
By Friday, the eleventh session since Trump’s duties were announced, exhaustion had come, but there was no feeling to calm the situation. On Friday, Beijing increased its duties on imports from the United States to 125%.
The shares fell, the dollar sank to a decade of the protected Swiss franc, and the talks focused on whether the period marked the beginning of the end of the US dominance in global finances.
« It’s like a year of trade in a few days, » said Jack McIntyre, a portfolio manager for Brandywine Global in the United States, managing assets worth nearly $ 60 billion. « You focus on things you know, » he said, referring to further dollars, while the US economy is slowing down and perhaps the rest of the world continues to sell US assets.
