Shares in Australia and Japan opened lower while futures pointed to a 2% drop in Hong Kong. A gauge of Chinese shares in the US had its biggest drop in more than four months after Alibaba Group Holding Ltd.’s American depositary receipts closed down 10%, the biggest decline since October 2022. The yield on 10-year Treasuries slid 1 basis point to 4.4% in early Asian trading while gold touched a record Monday.
Sentiment in the broader market soured after Trump rolled out a memorandum telling a key government committee to curb Chinese spending on tech, energy and other strategic American sectors. That’s threatening to undo a rally in Chinese technology shares after optimism over DeepSeek and President Xi Jinping’s meeting with corporate leaders including Alibaba’s Jack Ma, had sent a key gauge to a three-year high.
“Trump’s directive to limit Chinese spending and investment in strategic US sectors has been the trigger for a solid reduction in extended longs and this will spill over in the HK equity cash open,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. “The key aspect will then be how China/Asia-based traders act after the initial weakness.”
A slide in most megacaps hit the final stretch of US trading as the S&P 500 dropped 0.5%, the Nasdaq 100 lost more than 1%, and the Dow Jones Industrial Average wavered. Just days before Nvidia Corp.’s results, hedge funds’ net exposure to “Magnificent Seven” stocks hit the lowest since April 2023. The chipmaker lost 3.1%.
Trump laid out the plan in a national security presidential memorandum signed Friday that commits to using “all necessary legal instruments” to bar Chinese affiliates from investing in US technology, critical infrastructure, health care, agriculture, energy, raw materials and other industries. The directive sets the stage for a more muscular use of CFIUS, a secretive panel that scrutinizes proposals by foreign entities to buy US companies or property, to thwart Chinese investment.Trump also deepened Washington’s split with allies over Ukraine, withdrawing US condemnation of Russia’s 2022 invasion at the United Nations and among Group of Seven countries as he aims to end the war on terms agreeable to Moscow.The US president also said tariffs scheduled to hit Canada and Mexico next month were “on time” and “moving along very rapidly” following an initial delay.
“This could be a key week for a stock market that’s mostly been trading sideways for more than two months,” said Chris Larkin at E*Trade from Morgan Stanley.
The Nasdaq Golden Dragon China Index fell 5.2% with Bilibili Inc. and Kingsoft Cloud Holdings also among stocks that dropped 10% or more.
US investors have started to boost bets that volatility will come back as Nvidia’s earnings on Wednesday could be the first in a whirlwind of events. The US benchmark has gone more than 30 sessions without posting consecutive declines of more than 1%.
The yield on 10-year Treasuries slid three basis points to 4.4%.
“The market is churning sideways, driven by investor confusion, a natural consolidation period following recent gains, and seasonal weakness in February,” said Mark Hackett at Nationwide. “However, the strong macro backdrop, robust earnings, and healthy fund flows argue for a breakout to the upside once momentum returns.”
Meantime, the Federal Reserve’s preferred inflation gauge is expected to cool to the slowest since June, but glacial progress on taming prices will keep officials cautious. The data is due Friday.
“If we see blowout earnings from Nvidia and softer-than-expected inflation data, that could add upward momentum to stocks,” said Clark Bellin at Bellwether Wealth.
In other markets, oil edged higher in a largely aimless session amid a slew of geopolitical uncertainties, including Russia-Ukraine peace talks and a possible increase in Iraqi crude production. Gold touched a fresh record on Monday, as exchange-traded funds backed by the precious metal draw renewed interest from investors.
