Recession fears weigh on markets as losses mount

David Morrison

SENIOR MARKET ANALYST

12 Mar 2025

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US markets came under further downside pressure yesterday as recession worries and ongoing trade disputes continued to weigh on sentiment. The S&P 500 briefly dipped into correction territory, as it dropped 10% from its recent highs, while the Dow lost nearly 500 points, or 1.1%. The tech-heavy Nasdaq outperformed the broader market as some tech stocks staged a late-day rally. The index closed 0.2% lower.

Overnight, Asian Pacific markets followed Wall Street’s lead, with most bourses closing in the red. The Japanese Nikkei was the exception, edging into territory by the close. Hong Kong‘s Hang Seng and Australia’s ASX 200 led the declines, reflecting broader risk aversion.

FX markets muted as key data looms

The yen remained under pressure for a second consecutive day as traders took a cautious stance ahead of today’s key US inflation update. Both the euro and sterling traded slightly lower in relatively quiet conditions, with investors opting to sit on the sidelines as they awaited fresh data to guide sentiment.

Gold, oil, and crypto: Risk-off sentiment prevails

Gold and silver ticked lower initially. But both precious metals inched into positive territory as the morning progressed. Technical and fundamental factors are fairly neutral currently, and traders will take their next prompt from today’s US Consumer Price Index release.

Oil prices were mixed in early trade after yesterday’s private inventory data revealed a build of over 4 million barrels, with today’s weekly data expected to show around half that figure. WTI remains vulnerable, hanging onto critical support amid persistent fears of weakening demand. Gas remained unchanged, drifting off recent highs as the market balanced supply concerns with softer demand.

Crypto struggled overnight as recession fears weighed on the risk sentiment. Bitcoin hovered around $81,000, while Ether remained under heavy selling pressure. It is trading back below $2,000 and struggling to find support. Sentiment remains fragile as the risk-off mood continues to dominate.

Volatility persists as tariff tensions rise

The VIX remains elevated. The front-month futures contract is trading just below 25 after spiking to the mid-26s during yesterday’s turbulent session. Market participants are wary of more volatility and have loaded up on S&P put options as the tariff narrative evolves.

On the economic front, all eyes will be on the US CPI print at 12:30, which is expected to come in slightly lower at 2.9% year-on-year. Meanwhile, the Bank of Canada is forecast to cut rates by 25 basis points, reflecting ongoing economic challenges.

In trade news, Trump’s 25% tariffs on steel and aluminium came into effect today, with Europe set to counter in April. Australia called the tariffs “totally unjustified,” while Canada managed to avoid a 50% hike after a late withdrawal of the measure.

Market outlook

The bulls once again fled the markets yesterday, rattled by growing recession fears and tariff uncertainties. Today, they will be hoping for two key outcomes: calmer rhetoric on tariffs and inflation data that comes in lighter than expected. The dollar remains under pressure, struggling to find support as oversold conditions persist.

With the VIX elevated and oil teetering on key support, investor sentiment is currently finely balanced between ‘risk on’ and ‘risk off’. Today’s inflation numbers may provide some relief, but the broader mood is still one of heightened uncertainty. As always, staying alert and reactive to breaking news and data will be crucial in navigating this volatile environment.


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