Asian Markets Brace for Tariff Feud's Impact

(Bloomberg) — Asian stocks were poised for a cautious open as investors weighed escalating US-Europe trade tensions sparked by President Donald Trump’s tariff threats over Greenland. Equity-index futures for Australia and Japan edged lower, while contracts for Hong Kong advanced. Europe’s Stoxx 50 index notched its steepest drop in two months as investors sought haven assets, driving gold and silver to fresh records. The dollar slipped 0.3% as the Swiss franc outperformed. While US markets were shut for a public holiday on Monday, S&P 500 futures fell 0.9%. The yen was steady in early trading Tuesday after Japanese Prime Minister Sanae Takaichi officially called an early election next month. Trump’s threat to tariff countries opposing his bid to control Greenland has reignited the market volatility seen early in his second term. European resistance and talk of retaliation deepened the selloff, while investors have sought refuge in precious metals amid rising tensions and renewed attacks on the Federal Reserve’s independence. The tariff threats are “reminiscent of a mafia extortion racket,” said Peter Mallin-Jones, an analyst at Peel Hunt LLP. “The precious metal impact looks a reaction to a move away from US dollar assets and the potential inflationary impact of a trade war between the US and EU, let alone a chilling effect on economic activity.” The standoff comes as resilient earnings and ongoing investment in artificial intelligence have underpinned risk appetite. Market direction now partly depends on the European Union’s response, with the bloc considering tariffs on €93 billion ($108 billion) worth of US goods. French President Emmanuel Macron intended to request the activation of the EU’s so-called anti-coercion instrument, Bloomberg reported over the weekend. German leader Friedrich Merz, however, said Monday that his country’s heavier dependence on exports means it’s less willing to unleash the countermeasure. Read: Merz Aims to Rein In Macron on EU Response to Trump’s Threat US 10-year Treasury futures fell, implying a two basis-point increase in the corresponding cash yield. German rates retreated at the short end as traders bet a sustained trade war could open room for interest-rate cuts. Longer-dated yields rose on concerns governments may issue more debt to support growth. “The nervousness is palpable,” said Alexandre Baradez, chief market analyst at IG in Paris. “All in all, you have so many issues piling up — from credit cards to the independence of the Fed and tariffs — that I really don’t see the case for stock markets to keep on breaching new records.” In Asia, investors will be monitoring Japanese sovereign debt on Tuesday following the election announcement. Bond yields had jumped on Monday as reports of a tax cut proposal renewed concerns about Takaichi’s stance on fiscal policy. The yield on 30-year debt climbed 10 basis points to 3.61%, its highest level since its debut, while rates on 10- and 20-year notes rose to their highest levels since 1999. The prime minister also said the vote would provide a mandate for fundamental changes to strengthen both economic and defense policy, adding that no one will help a country that can’t help itself. Elsewhere, in more signs of geopolitical tension, China sent a military drone into Taiwanese airspace for the first time, underscoring Beijing’s efforts to test the self-run democracy’s defenses. China’s military said on social media the aircraft conducted “legitimate and lawful” training. Some of the main moves in markets: Stocks Nikkei 225 futures fell 0.3% as of 7:16 a.m. Tokyo time Hang Seng futures rose 0.2% S&P/ASX 200 futures fell 0.4% Currencies The Bloomberg Dollar Spot Index fell 0.3% The euro was little changed at $1.1646 The Japanese yen was unchanged at 158.12 per dollar The offshore yuan was little changed at 6.9558 per dollar The Australian dollar was little changed at $0.6712 Cryptocurrencies Bitcoin was little changed at $92,916.07 Ether fell 0.1% to $3,207.15 Bonds Australia’s 10-year yield advanced two basis points to 4.76% Commodities West Texas Intermediate crude was little changed on Monday Spot gold rose 1.6% to $4,669.98 an ounce This story was produced with the assistance of Bloomberg Automation. ©2026 Bloomberg L.P.