Asian equities are feeling the heat at the open on Friday, mirroring the brutal selloff that saw US stocks implode through key technical milestones overnight. The relentless pressure stems from President Donald Trump’s escalating trade war, which continues to hammer sentiment and inject fresh uncertainty into global markets. However, there’s a slight reprieve in risk aversion as some of the government shutdown angst weighing on sentiment over the past 18 hours appears to be easing.

That said, the overall backdrop remains fragile. With Wall Street firmly in correction territory and the global tariff storm showing no signs of abating, traders across Asian markets are bracing for another volatile session. While dip buyers may test the waters, the path of least resistance still appears to be lower—especially with no immediate policy lifeline from the Fed or the White House in sight.

All eyes are now on whether risk assets can stabilize or if another wave of selling pressure emerges as markets continue to digest the broader economic and inflationary implications of Trump’s trade war gambit.

US stock futures are stabilizing at Asia open as short-covering kicks in, offering a reprieve from the relentless selling pressure. The pullback in market anxieties comes after Senate Majority Leader Chuck Schumer stepped away from the government shutdown ledge.

With Democrats caught between their activist base—demanding an all-out confrontation to curb Trump and Musk’s aggressive dismantling of federal agencies—and moderates fearing a political backlash from disrupting government services, the retreat from shutdown brinkmanship has temporarily reprieved markets.

The risk-off sentiment that dominated earlier in the day is now unwinding slightly.

But don’t mistake this bounce for a reversal—if the latest price action around the tariff turmoil is any indication, this rally could merely be a gift-wrapped opportunity for bears to reload.

US stocks took another brutal hit on Thursday, piling onto what’s already been a punishing week for Wall Street. Recession fears are hot as traders digest the latest inflation data, the PCE pass-through effects, and the relentless tariff turmoil. Add to that “ was” the looming Schumer Shutdown—the latest political grenade in Washington—and you had a perfect storm for risk aversion.

But the toxic cocktail of policy uncertainty, slowing growth concerns, and sticky inflation leaves investors with few places to hide. Equities are reeling, and safe-haven flows are ramping up, signalling that the pain trade might not be over just yet.

The damage? It wasn’t pretty. The S&P 500 plunged 1.4%, officially sliding into correction territory as it now sits more than 10% below its February record high. The Nasdaq, which already entered correction mode last week, got hammered even harder, shedding nearly 2%. Meanwhile, the Dow Jones Industrial Average cratered 1.3%, bleeding nearly 550 points.

Gold was the day's standout performer, surging toward the $3,000 mark as speculation swirled around a potential large-scale physical delivery at the COMEX. Safe-haven demand accelerated as investors sought protection from policy uncertainty and renewed recession fears. The combination of sticky inflation, geopolitical risks, and an increasingly fragile risk environment is keeping bullion well-supported, with traders now watching closely to see if this latest rally has the momentum to push prices into uncharted territory. Should market conditions continue to deteriorate, gold’s role as a defensive asset could see even stronger inflows.

The bottom line: Gold remains in high demand across both retail and official sectors, with ETF inflows surging and central banks continuing to accumulate at a steady clip through February. In an environment rife with geopolitical tensions, policy uncertainty, and the ever-devolving tariff landscape, investors are seeking refuge in gold, reinforcing its status as the ultimate hedge against volatility. With structural demand tailwinds firmly in place, the market’s appetite for bullion shows no signs of waning.

Markets are walking a tightrope as a relentless wave of tariff headlines and political brinkmanship keeps traders on edge. Wall Street has been whipsawed by uncertainty, but Trump's all-out trade offensive is at the core of the turmoil. Just when investors thought they had a handle on the situation, the White House doubled down—again.

Trump came out swinging, threatening a 200% tariff on EU wines and spirits in response to Europe and Canada’s planned countermeasures against U.S. steel and aluminum duties. If markets were hoping for a softening stance, they were sorely mistaken. The president stood firm in the White House, making it crystal clear: there will be no bending, no backing down. This isn’t just a tit-for-tat trade spat—it’s an economic battle royale, and traders are caught in the crossfire.

On the macro front, Thursday’s wholesale inflation data threw a wrench into the narrative. February’s Producer Price Index (PPI) was flat, falling short of the expected 0.3% increase—giving inflation hawks a brief reprieve. But don’t get too comfortable. The annualized PPI figure still clocked in at 3.2%, barely missing the 3.3% forecast, keeping the Fed firmly in limbo on its next move.

With tariff salvos flying, shutdown risks escalating, and inflation signals murky at best, markets remain a battleground. Traders are bracing for another round of policy-induced whiplash, knowing full well that in this environment, certainty is a luxury they simply won’t get.

Is the hard truth sinking in? Trump isn’t bluffing and is more than willing to absorb short-term economic and market pain to push his agenda. That’s a game-changer. Until investors see a clear off-ramp from the tariff war or a Fed pivots aggressive enough to offset the damage, the selloff in risk assets likely has more room to run. Equities remain a treacherous minefield while haven demand continues to supercharge capital flows into bonds, bullion, and the not-so-almighty dollar, but far from the dirtiest shirt in the FX laundry basket. The pain trade ( stocks lower) is in full swing, and right now, the only safe bet is that volatility isn’t going anywhere.

On the surface, this week’s inflation data looked like a win—consumer prices softened, and producer prices barely budged. But don’t let the headlines fool you. Beneath the surface, the Fed’s preferred inflation gauge is likely drifting in the wrong direction, setting up a fresh policy dilemma that could keep Powell & Co. stuck between a rock and a hard place.

Wall Street economists, parsing through this week’s price data, are now calling for core PCE inflation—the Fed’s go-to metric—to print somewhere between 0.3% and 0.4% for February, up from 0.28% in January. If those estimates are on point, the 12-month core PCE rate will climb to somewhere in the 2.7%-2.8% range, a notch above January’s 2.65% and drifting further from the Fed’s 2% target. In other words, inflation isn’t spiralling, but it sure isn’t cooling fast enough to justify rate cuts, either.

The takeaway? The market may hope for Fed easing, but policymakers are running out of reasons to play along. Sticky inflation, an unpredictable tariff storm, and growing uncertainty around economic growth leave the Fed in a bind. The March meeting is a lock for a hold but beyond that? The debate is anything but settled. Rate cuts were once seen as inevitable—now, they’re a moving target, and traders betting on a dovish pivot might find themselves grasping at straws.

Right now, Wall Street is firmly in the grip of the sellers. With no clear sign of a "Trump put" or a Fed pivot in sight, the broader economic environment suggests markets will need to fall much further—or collapse much faster—before policymakers are forced into action. The Fed has already been caught flat-footed before, and with inflation still proving sticky, Powell and company can’t afford to knee-jerk into rate cuts just because stocks are wobbling.

Volatility is creeping higher across equities, bonds, and key FX pairs, reaching its most elevated levels in months. But crucially, it’s still well below the threshold associated with full-blown market crises, signalling that investors aren’t in full panic mode—yet. The real kicker? If this downturn is driven by Trump’s tariff shock rather than a traditional demand slump, it could be a far messier macro cocktail. Tariffs could push prices higher while simultaneously slowing growth, a stagflationary mix that would leave the Fed stuck between a rock and a hard place.

A tumbling stock market and an inflationary trade war would be an extremely awkward position for Powell. If tariffs squeeze consumers and corporate margins while keeping price pressures elevated, the Fed may have to watch the market burn without a firefighting hose. That’s a nightmare scenario—one that traders are starting to price in.