Asian stocks drop after Wall Street, bonds steady

Asian stocks retreated on Wednesday, tracking a selloff on Wall Street as the US-Europe trade conflict over Greenland and a turmoil in bond markets rattled investors. Gold hit a fresh record.

Equities opened lower in Japan, South Korea and Australia after the S&P 500 posted its steepest loss since October, wiping out year-to-date gains. The VIX volatility gauge surged above 20 for the first time since November. Futures contracts for US benchmarks edged higher early Wednesday.

Investors will also be closely monitoring Japanese bonds after Finance Minister Satsuki Katayama called for calm amongst market participants following a selloff that pushed yields to all-time highs.


Treasuries steadied in Asian trading on Wednesday. Long-term US yields had hit a four-month high in the US session with the 30-year gaining eight basis points as investors reacted to a rout in Japanese bonds and news that a Danish pension fund was planning to exit Treasuries. A Bloomberg gauge of the dollar was a touch lower Wednesday.

The moves underscored mounting investor unease over erratic US foreign policy, with global funds pulling back from American assets. President Donald Trump’s threat to impose tariffs on European nations that rejected his proposal to purchase Greenland has helped inject fresh volatility into markets, and forced investors to reassess US stability as a safe haven.

“Tariff War 2.0, or Territory War 1.0 if you prefer, is in full swing and has potential to cause significant near-term market disruptions,” said Victoria Greene at G Squared Private Wealth. “A lot depends on how the next few weeks play out. So, we are not ‘panic selling,’ but watching carefully and ready for volatility.”

The global market selloff on Tuesday was first triggered by domestic issues in Japan, where yields on 30-year debt surged over a quarter percentage point on concerns about the Prime Minister Sanae Takaichi’s plans to cut taxes and boost spending. The jump threatened to unravel so-called carry trades — which involve buying global assets with low-interest loans in Japan — and helped push up bond yields elsewhere.

Japan’s finance minister called on market participants to calm down, pointing to the nation’s lowest reliance on debt issuance in 30 years, rising tax revenue and the smallest fiscal deficit among Group-of-Seven economies as evidence to support the government’s view that its fiscal policy is responsible and sustainable.

Elsewhere, Danish pension fund AkademikerPension said it will exit US Treasuries by the end of the month amid concerns that the Trump administration has created credit risks too big to ignore.

“The US is basically not a good credit and long-term the US government finances are not sustainable,” Anders Schelde, chief investment officer at AkademikerPension, told Bloomberg on Tuesday.

Treasury Secretary Scott Bessent also urged calm, comparing the uproar over Greenland to what he called the “hysteria” that followed Trump’s announcement in April of sweeping tariffs. Trump is expected to arrive in Davos for the World Economic Forum on Wednesday.

While traders have been able to get past a whirlwind of other unexpected developments this year — including the White House’s capture of Venezuela’s leader and its renewed attacks on the Federal Reserve — the size of the moves suggests that investors’ willingness to shrug off earlier shocks is beginning to erode.

Meanwhile, South Korea will hold off on fulfilling a pledge to invest as much as $20 billion in the US this year given the pressure on the nation’s currency, according to a person familiar with the matter.