Asian stock markets wavered in early trading on Tuesday as an overnight decline on Wall Street rattled investors and increased uncertainty over trade and geopolitics dampened risk appetite. The region's broadest benchmark, MSCI's index of Asia-Pacific shares excluding Japan, surrendered earlier gains from a six-day run and was last down 0.2%, with South Korea among the laggards.
Japan's Nikkei 225 advanced 0.7% as Tokyo returned from a holiday, while S&P 500 e-mini futures were up 0.1% in Asia trade. The overnight swing on U.S. markets included a 1.0% drop in the S&P 500, which erased the prior week's gains, and a 1.1% fall in the Nasdaq Composite as investors reacted to renewed concerns about the potential displacement effects of artificial intelligence across software and other industries.
Analysts at Bernstein noted in a research report that stock market momentum had come under pressure with "increased concerns around the AI trade and escalation in geopolitical and trade uncertainty." A bearish note from Citrini Research on possible risks to the global economy also contributed to fragile investor sentiment.
Trade policy uncertainty intensified after U.S. President Donald Trump warned countries not to renege on trade deals recently negotiated with the United States following a Supreme Court decision that struck down his emergency tariffs. Trump said nations that stepped back could face much higher duties applied under different trade laws. Markets were further unsettled by the emergence of a new tariff route based on Section 122 of the Trade Act of 1974, which added to confusion over evolving U.S. protectionist measures.
Market volatility increased: the CBOE Volatility Index, or VIX, rose 1.9 percentage points to 21.01. Treasury yields were little moved overall, with the U.S. 10-year note up 0.6 basis point at 4.029% as investors considered the possible implications of the Supreme Court's decision on U.S. tax receipts.
In currency markets, the U.S. dollar strengthened modestly against the Japanese yen, up 0.1% at 154.77 yen, while the Chinese yuan was unchanged in offshore trade at 6.889. Liquidity in regional markets received a boost as both Japan and China returned from holidays on Tuesday.
Fed funds futures continued to reflect strong odds that the U.S. central bank will keep policy on hold at its next meeting. The CME Group's FedWatch tool showed an implied 95.5% probability that the Federal Reserve will remain on hold at its two-day meeting beginning March 18, little changed from the prior day.
Commodities were mixed amid ongoing diplomatic and security concerns. West Texas Intermediate crude edged down 0.1% to $66.23 a barrel as tensions simmered between the United States and Iran. In an indication of regional security worries, a senior State Department official said the department is withdrawing non-essential personnel and eligible family members from the U.S. embassy in Lebanon due to heightened worries about the risk of military conflict.
Precious metals and cryptocurrencies showed varied moves as investors sought safety and speculative exposure. Gold rose 0.3% to $5,244.96 while silver slipped 0.1% to $88.12. Bitcoin climbed 0.4% to $64,832.48 and ether eased 0.1% to $1,861.22.
Key indicators and market moves in this session reflected a mix of risk-off impulses from U.S. equity weakness, policy uncertainty stemming from trade actions and court rulings, and elevated geopolitical concerns that continue to influence flows into safe-haven assets and energy markets.