Europe’s Stoxx 600 index remained flat in early trading, while Asia-Pacific stocks pared earlier losses, recovering from a 1.75% drop to trade just 0.5% lower. Meanwhile, U.S. stock futures ticked up 0.3%, signaling a cautious rebound.
Monday’s dramatic sell-off was triggered by U.S. President Donald Trump’s comments in a Fox News interview, where he spoke about a “period of transition” and refused to rule out a recession. Investors, who had assumed Trump would back off if markets tanked, are now recalibrating their expectations.
The rush to U.S. Treasuries sent the 10-year yield down 10 basis points on Monday, marking its largest daily move in a month. It slid another 2 basis points on Tuesday to 4.12%. The two-year yield, closely tied to Federal Reserve rate expectations, hit a five-month low, last seen at 3.88%.
Traders are now pricing in 85 basis points of Fed rate cuts in 2025, up from 75 basis points on Monday, according to LSEG data. However, Wednesday’s U.S. consumer price index (CPI) report could shake those expectations if inflation remains stubbornly high.
The Japanese yen touched a five-month high against the U.S. dollar before pulling back to trade flat at 147.2. The yen has strengthened 7% against the dollar in 2025.
The euro climbed 0.6% to $1.10898.
Oil prices remained steady as traders balanced concerns over U.S. tariffs slowing global growth with OPEC+ ramping up supply.
Gold surged to $2,908 per ounce, hovering near its record high. The metal is up 10% in 2025, following a 27% gain last year.
With investors on edge, all eyes are now on Wednesday’s inflation data, which could determine the Fed’s next move and dictate the market’s direction in the coming weeks.
