(Bloomberg) -- Asian markets face heightened volatility on Tuesday after stocks, bonds and commodities were whipsawed by fears that President Donald Trump’s trade war is risking global economic growth. US futures rose in early trading.

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Futures pointed to a rebound in Japan stocks, gains in Australia and further losses in Hong Kong and mainland China. A gauge of US-listed Chinese shares fell more than 5% after Trump threatened to slap additional 50% tariffs on China. S&P 500 contracts climbed 0.7% after the index neared a bear market on Monday before finishing slightly down. Treasuries weakened in a volatile session, while the dollar gained.

Fears of an economic downturn led to sharp swings in US markets as investors absorbed further tariff news. Trump said he wasn’t considering a pause on his plan to implement additional tariffs on dozens of countries despite outreach from trading partners eager to avoid the levies, while still signaling he could be open to some negotiations. Meanwhile, Treasury Secretary Scott Bessent said that perhaps almost 70 countries now have approached the US to negotiate.

“For now, it looks like news out of Washington will continue to drive the market’s swings, one way or the other,” said Chris Larkin at E*Trade from Morgan Stanley. “Some of the market’s notable lows over the past few decades have been preceded by similar levels of volatility, although it’s always impossible to know when prices will eventually find their bottom.”

In the bond market, Treasuries fell, erasing a portion of their biggest weekly advance since August. The yield on the 10-year rose 19 basis points as investors liquidated profitable trades to cover equity losses.

“We are in this environment where a little bit of good news has a disproportional environment on asset prices,” said Ian Pollick, head of fixed income, commodities and currency strategy at CIBC. “We saw some potential rebalancing of the markets today, with the equity market starting to improve, and it had the first impact on displacing bonds.”

Traders’ bets on how much the Federal Reserve will lower interest rates this year fluctuated between three and five quarter-point cuts. Four reductions are now reflected in overnight interest-rate swaps this year, with the first fully priced in for June. A May reduction is seen as a coin toss.

Story Continues

In Asia, Chinese shares plunged on Monday while sovereign yields neared an all-time low as investors braced themselves for the fall-out from a spiraling trade conflict between the world’s two largest economies. China’s retaliation against Trump’s sweeping tariffs is forcing investors to confront the reality that a much-feared trade conflict has entered a new phase.

Hong Kong’s benchmark Hang Seng Index plunged 13%, the most since 1997, with the session concluding with the highest equity turnover ever.

Meanwhile, Trump has assigned two members of his cabinet to kick off bilateral trade talks with Japan after a call with Prime Minister Shigeru Ishiba on Monday. Japan was slapped with a 24% across-the-board reciprocal tariff scheduled to begin Wednesday, in addition to a 25% auto duty.

“I expressed my strong concern that the tariff measures would reduce the investment capacity of Japanese companies,” Ishiba told reporters in Tokyo after his call with Trump. “I believe that Japan can overcome this situation, which is akin to a national crisis.”

Volatility

Traders looking for US equities to snap back after a selloff of trillions of dollars were faced with a series of twists and turns on Monday. The S&P 500’s bottom-to-top intraday reversal was the biggest since 2020 when Covid upended global trading.

The Cboe Volatility Index — known as VIX and measures expected volatility for the S&P 500 about a month out — pushed away from the 60 mark hit earlier Monday, but major stock selloffs have typically reached their culmination amid a level of fear that hasn’t yet been hit.

The index topped out at nearly 66 in August during the market rout sparked by the unwind of the Japanese yen carry trade and recession jitters, and it hit 85 in the 2020 selloff fueled by Covid. In 2008, it rocketed to just short of 90 as worries over the great financial crisis hammered stocks.

“It is worth remembering that this market shock happened as the result of a surprising change in policy – not a fundamental breakdown in a key sector, such as housing in 2008 or tech in 2000,” said Carol Schleif of BMO Private Wealth. “A moderation in the severity of that policy, particularly given the strong economic starting point much of the globe was on going into it, and could help create a market floor.”

As markets wobbled, some Wall Street titans sounded the alarm. Bill Ackman said the US is “heading for a self-induced, economic nuclear winter.” Boaz Weinstein predicted the “avalanche has really just started.” And Jamie Dimon said it “may be disastrous in the long run.”

To Matt Maley at Miller Tabak, those looking for a V-shaped recovery in the stock market will likely be very disappointed.

“We should see a strong bounce at some point soon, but the process of repricing the market to its realistic economic outlook will take time,” Maley said. “There will be plenty of time to get aggressive when it becomes more evident that the worst of the decline is behind us.”

In commodities, oil tumbled to a four-year low while gold was on track for the worst three-day crash in more than four years.

Now that the US has announced broader tariffs, what are you doing with your investments? Tell us in the latest MLIV Pulse survey.

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.7% as of 7:34 a.m. Tokyo time Hang Seng futures fell 0.6% S&P/ASX 200 futures rose 0.8% Nikkei 225 futures rose 5%

Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.0915 The Japanese yen was little changed at 147.92 per dollar The offshore yuan was little changed at 7.3442 per dollar The Australian dollar rose 0.1% to $0.5992

Cryptocurrencies

Bitcoin rose 1% to $79,710.73 Ether rose 0.5% to $1,577.9

Bonds

The yield on 10-year Treasuries advanced 19 basis points to 4.18%

Commodities

West Texas Intermediate crude rose 0.9% to $61.25 a barrel Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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