[SINGAPORE] Analysts on Tuesday (March 11) said uncertainty could weigh on US shares in the near term given the impact of tariffs and earnings outlook, as US markets sold off.
Asia could also be hit on a slowdown of investments from the tariffs factor, they said. Markets across the Asia-Pacific also declined on Tuesday.
Investors fear the impact of tariffs on the US’ major trading partners, such as China, Canada and Mexico. US President Donald Trump has said that the country’s economy is facing “a period of transition”, as he avoided addressing the possibility of a recession this year, according to Bloomberg.
Tim Murray, a capital markets specialist at T Rowe Price, noted a growing scepticism towards US stocks given country’s earnings outlook, as compared to an “incrementally more positive environment for non-US stocks, particularly in Europe”.
He added: “US stocks typically have featured higher valuations but also stronger earnings fundamentals than non US stocks since the 2008–2009 global financial crisis. While US relative valuations remain high, future earnings may not support that premium.”
“The bottom line is that with US stocks facing scepticism over the near term, there may be more attractive opportunities elsewhere – particularly in regions offering more attractive valuations combined with an improving macro outlook.”
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Heightened policy uncertainty could fuel market volatility in the near term, BlackRock analysts noted.
Despite this, in the longer term, BlackRock remains overweight on US stocks as it thinks that a recession is unlikely, even though job creation has slowed.
It said that the labour market remains strong in contrast to soft survey data showing declining consumer confidence
“US payrolls data showing slower but still solid job gains suggests market concerns about a recession are overdone, in our view,” they noted.
As for Asia, the region is set to experience a slowdown of investments, but the degree of this will depend on the magnitude and severity of Trump’s tariffs, highlights Michael Wan, senior currency analyst at MUFG.
He added: “Our North Star is that Trump 2.0’s tariffs will be larger and more pervasive beyond the day-to-day whiplash.”
“For Asia specifically, while tariff and trade policy uncertainty has already had an impact on US growth indicators, this will over time also feed through to our region through slowing investments into manufacturing factories and also weaker exports as US consumers adjust to a potential new reality of higher prices and lower supply.”
Wan sees Asian currency weakness in the near term, citing that markets have been underpricing the downside risks of Trump’s tariffs and policy to Asia’s growth.
The tech-focused Nasdaq had suffered its biggest one-day loss since 2022, declining 4 per cent overnight to 17,468.32.
The S&P 500 dropped 2.7 per cent, closing at 5,614.56 and the Dow Jones Industrial Average fell 2.1 per cent to 41,911.71.
European markets also sank to their lowest in one month on Monday (Mar 10).
The declines are an extension of losses that have been ongoing for the past few weeks, with the S&P 500 down more than 8 per cent from its Feb 19 high, and the Nasdaq at a more than 10 per cent decline from its December high.
Across Asian markets, Japan’s Nikkei 225 tumbled more than 2 per cent in early trade, but shed losses to close 0.6 per cent lower at 36,793.11.
Likewise, Australia’s ASX 200 was down 1.4 per cent earlier, but pared declines to settle 0.9 per cent lower at 7,890.1. South Korea’s Kospi dropped 1.3 per cent to 2,537.6.
Taiwan’s Taiex was down 1.7 per cent at 22,071.09, while Hong Kong’s Hang Seng Index closed almost flat at 23,782.14.
Singapore shares tumbled by as much as 2 per cent on Tuesday, before closing 1.9 per cent lower at 3,825.83.
Banks suffered heavy losses, with DBS declining 3.5 per cent to S$44.23, UOB falling 3.4 per cent to S$37.35, and OCBC dropping 2.1 per cent to S$16.69.
Shares such as Singtel, SIA, Seatrium and SGX also declined more than 1 per cent.
“The sharp sell-off in equities… continued as concerns over US tariff policy and government job cuts continued to weigh,” said ANZ Research.
“No let-up in uncertainty seems likely in the near term given reciprocal and other tariffs will be announced in April with more to follow in May,” it added.
