Global stocks slid for a second day on Friday after US President Donald Trump's sweeping tariff plans wiped $2.4 trillion off Wall Street equities, sending investors running for cover in government bonds as recession fears gripped markets.
Banking stocks cratered as investors fretted about growth and priced in far more central bank rate cuts, with benchmark 10-year US Treasury yields sliding to their lowest since October, after Trump slapped a 10% tariff on most US imports and much higher levies on dozens of countries.
"If the current slate of tariffs holds, a Q2 or Q3 recession is very possible, as is a bear market," said David Bahnsen, chief investment officer at The Bahnsen Group.
"The question is, does President Trump seek some sort of off-ramp for these policies if and when we see a bear market in the stock market."
Europe's STOXX 600, slid 1.1% in early trading after shedding 2.6% on Friday. Japan's Nikkei 225, slumped 2.8% overnight for a second session running.
Futures for the US S&P 500 fell 0.4% on Friday, pointing to a more contained drop at the open than on Thursday, when the cash index plunged 4.8% in its biggest one-day fall since the COVID-19 crisis in 2020.
Nasdaq futures were down 0.3% after the index dropped 5.4% on Thursday.
After years of huge inflows into US markets and stellar performance by the American economy, investors are suddenly fretting about a reversal in growth
The risk of a US and global recession this year has risen to 60% from 40% earlier after Trump's tariff announcements, JP Morgan said.
BANKS SLIDE AS RATE CUT BETS RISE
Traders on Friday were pricing in more than 100 basis points of Federal Reserve rate cuts this year, up from around 75 basis points on Wednesday, and increased their bets on Bank of England and European Central Bank reductions too.
Lower interest rates - which dent lenders' margins - and worries about growth battered banking stocks, with the STOXX 600 banking index, shedding 4.2% in early trading.
HSBC shares, dropped 3.2%, UBS, fell 2.5% and BNP Paribas, slid 3.4%.
That followed an 8% rout for Japanese banks overnight, and a sharp sell-off of Wall Street lenders on Thursday. Citigroup, dropped more than 12%, Bank of America sank 11% and a host of other major lenders suffered similar falls.
The most obvious sign of nerves about the health of the US economy and markets was a 1.9% drop in the dollar index on Thursday, the biggest fall since November 2022.
The dollar found a footing on Friday, however, with the euro down 0.5% after rallying 1.9% on Thursday, while the pound fell 0.7%.
Japan's yen , a traditional safe haven, held broadly steady after rallying around 2% the previous day. The Swiss franc, another safe haven, perked up about 0.6% .
"The thing that might help markets a little bit is that we get data that suggests that, actually, we are going to get 1%-plus growth in the US in the last quarter," said Michael Metcalfe, head of macro strategy at State Street Global Markets.
Metcalfe pointed to US nonfarm payrolls data, due at 1230 GMT (8.30 a.m. ET), as one key data point and retail sales figures in two weeks as another.
Friday's employment data is expected to show the US economy added 135,000 jobs in March, down from 151,000 in February.
As investors continued to hunt for safety, 10-year US government bond, or Treasury, yields fell 11 basis points to 3.951%, after sliding 14 basis points on Thursday. Yields move inversely to prices.
Japanese 10-year government bond yields were set for their biggest weekly fall - at 37 basis points - since 1990 and last traded at 1.175%.
Some investors remained nervous about central banks' room for action should tariffs drive up inflation.
"Central banks are not well-equipped to deal with stagflation," said David Doyle, head of economics at Macquarie Group. "Stronger core inflation is likely to limit the extent of any policy response."
