Markets crashed in the wake of US tariffs

Date: April 7, 2025

• The STI plunged 3.7% to 3,825.85 after US unveiled its tariffs
• Wall Street cratered – major indices lost 7.9-10%
• Bonds benefited from a flight to safety
• Risk of recession will rise materially if tariffs stay in place: Deutsche Bank
• “There will be blood’’: JP Morgan
• Rate cut odds are rising
• Key SingPost executives have resigned
• Cordlife served with two letters of demand

 

The STI initially held up well but eventually surrendered

The local stock market may have held up reasonably well in the face of tariff-related worries from Wall Street over the previous weeks, but it ultimately caved in when concerted selling took place on Friday following worse-than-expected tariffs announced by the Trump administration on Thursday that many believe could trigger a global recession.

The Straits Times Index, which had risen 77 points the previous fell every day, the selling getting progressively worse as the days passed, culminating in a 116 points or 3% loss on Friday at 3,825.85 which brought the loss for the four trading days to 147 points or 3.7%.

Average daily turnover was S$2b versus S$1.47b the week before. Banks took a large hit – DBS plunged S$3.17 or 6.8% to S$43.30, UOB fell S$2.63 or 6.9% to S$35.46 and OCBC’s loss was S$0.68 or 3.9% at S$16.62.

Trumps tariffs – worse than expected, leading to worries over global economy

President Donald Trump’s plans for broad 10% tariffs paired with higher rates for many key trade partners caught Wall Street off guard when they were announced on Thursday. Along with hammering firms that import physical goods to the U.S., the tariffs have the potential to spark price growth. Recession worries were also on the rise.

On Thursday the S&P 500 sank 4.8%. The Nasdaq Composite slid 6%. The Dow Jones Industrial Average fell 1,679 points, or 4%. All three indexes finished with their largest daily declines since 2020.

On Friday the selling worsened after China said it would retaliate against the U.S. with 34% tariffs of its own. The tech-heavy Nasdaq sank 5.8%, closing more than 20% below its December record to put it in bear market territory.

The S&P 500 fell nearly 6% and the Dow fell 2,231 points or 5.5% to 38,314.86 closing down 10% from its recent high to fall into a correction.

For the week, the Dow’s loss was 7.9%, the S&P fell 9% and the Nasdaq Composite plunged 10%.

All told, US stocks shed some US$6.6 trillion in market cap on Thursday and Friday, the largest two-day market cap slide for U.S. listed stocks on record.

Stocks fell even after the March update on employment came in better than expected. Peter Boockvar, an independent economist and market strategist, called it “the last jobs report before the global trade earthquake of April 2nd.”

Recession worries now rising

“The Trump administration may be playing a game of chicken with trading partners, but market participants aren’t willing to wait around for the results,” SPDR Chief Investment Strategist Michael Arone was quoted saying by US newspaper Barron’s on Thursday.

“Instead, investors are selling first and asking questions later. If, and it’s a big if, Trump’s reciprocal tariffs result in lower overall global trade barriers, risk assets will rebound swiftly. But if our trading partners retaliate and pursue countermeasures, economic growth will plunge and markets likely will too.”

Thursday’s Liberation Day festivities in the Rose Garden on 2 April set off a freefall in stock prices on increasing fears of a trade war said Ed Yardeni, president of Yardeni Research. “The worst-case scenario is a recession if high tariff rates stick, leading to a slowdown in business and consumer spending that cause layoffs.”

Tariffs are expected to significantly lift costs for businesses and consumers. Surveys of both groups have indicated they will curb their spending, which has the potential to cause a recession.

Bonds benefited from a flight to safety

The yield on the 2-year Treasury note fell to 3.67%. The 10-year yield fell to 3.99%. Bonds and consumer staples were among the few safe havens for investors on Thursday. Health care, telecoms, and utilities also held up far better than consumer discretionary, energy, and tech.

Risk of recession will rise materially if tariffs stay in place: Deutsche Bank

Deutsche predicts gross domestic product will grow by about 1% this year if the tariffs remain the same as announced, down from 2.2% growth previously. The tariffs could push inflation, as measured by the core personal consumption expenditures index, to a 4% rate by the end of the year, up from a previous estimate of 2.7%. The risk of a recession will “rise materially” if the tariffs stay in place, strategists led by Jim Reid said.

If the U.S. does run into stagflation—slow growth coupled with faster inflation—the Federal Reserve is likely to lower interest rates. It may deliver up to four quarter-point cuts this year in that scenario. Meanwhile, the unemployment rate at the end of the year is likely to be between 4.5% and 5%, rather than a 4.1% estimate.

“There will be blood’’: JP Morgan

JP Morgan in the meantime has raised its odds of a US recession from 40 to 60% and anticipates that the tariffs could boost prices by 1% to 1.5% this year, with inflationary effects materializing in the middle quarters of 2025.

The team believes the impact will be amplified through retaliatory tariffs, supply chain disruptions, and a decrease in business sentiment domestically. While tariff hikes allow flexibility for fiscal policy easing, this will only slightly soften the blow, JPMorgan said.

The firm’s researchers predicted that US gross domestic product will slide by about 2 percentage points, while global GDP will decrease by 1 point, based on a model that uses a 20% tariff hike plus retaliatory action from China and Europe.

As the title of the note suggests, “there will be blood.”

Rate cut odds are rising

Odds of a rate cut by the Federal Reserve through June rose to 100%, up from 78.7% on Thursday, according to the CME FedWatch Tool. Traders see a 38.9% chance of at least one rate cut in May, up from 21.9% on Thursday.

Through the end of the year, traders see a 13.2% chance of three quarter-point cuts, a 35.7% chance of a full percentage point in cuts, and a 36.8% chance of 1.25 points in cuts. Odds of 1.5 points in rate cuts were up to 12.4% from 3% on Thursday.

Key SingPost executives have resigned

Lee Eng Keat, Sehr Ahmed, Noel Singgih and Michelle Lee were no longer listed on SingPost’s website as key executives as at Tuesday last week. They were, respectively, the head of strategy and communications, group chief people officer, group chief information officer and chief sustainability officer.

Audrey Teoh, chief information security officer, and Hendrik Liyuwardi, head of IT Infrastructure and service management, also announced their departure on Tuesday.

A spokesperson from SingPost told the Business Times: “As previously shared, SingPost is undertaking an organisational restructure taking place over several months’’.

“Out of respect for employee privacy, we do not disclose specific details on individual personnel. Our focus remains on maintaining operational strength and sustainability while managing this process with care for our employees.”

With these changes, SingPost is left with four key management executives: group chief operating officer Neo Su Yin, group chief financial officer Isaac Mah, acting chief executive officer for the international business unit Gan Heng and chief legal officer Jonathan Ooi.

Cordlife served with two letters of demand

Cordlife received two letters of demand on Mar 28, with regard to prior claims alleging loss and damage from cord blood units storage.

The clients, whose cord blood units are stored with Cordlife, fall under two categories. One is unlikely to be suitable for stem cell transplant purposes, and the other has units stored in tanks that are identified as falling within the “low risk” or “unaffected” band.

Those in the first category are claiming for damages which fall under breach of contract and negligence. The aggregate sum claimed by these persons falls within the jurisdiction of the General Division of the High Court, which handles claims exceeding S$250,000.

The other category has requested certain warranties and undertakings from the group as well as compensation for costs, among others.

Cordlife said if it is required to settle the claims in the letters of demand, it will likely result in “a negative impact on the financial position of the group” for the financial year ending Dec 31.

The private cord-blood bank reported a net loss of S$6.3 million for its second half ended Dec 31, 2024, compared with a net profit of S$1.3 million in the previous corresponding period.

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