The Kospi Index, one of the world’s best-performing benchmarks this year, fell 0.9%, while the South Korean won weakened after four days of gains. Japanese shares fell for a second day, weighed down by a stronger yen.
The yen traded near around 154 per dollar after gaining on the greenback over the past two sessions amid speculation the US may coordinate intervention with Japan. A gauge of the dollar was steady Tuesday, hovering around levels last seen in 2022. Gold and silver also traded near their record highs on Tuesday.
While much of the market’s focus has been on currencies and the risk of yen intervention, tariff concerns have also resurfaced after Trump warned of 100% levies on Canada. The added uncertainty comes in a pivotal week for investors, with megacap technology earnings set to test whether the artificial-intelligence driven rally can be sustained.
“Tech has become more of a show-me story,” said Darrell Cronk, chief investment officer for wealth and investment management at Wells Fargo, which manages $2.3 trillion. “If Big Tech can continue to deliver, I think capital will start flowing in tech’s direction again.”
In the US, companies accounting for roughly a third of the S&P 500’s market capitalization report this week.
The US president has ratcheted up trade tensions with several allies in recent weeks, threatening to raise duties on Canadian products to 100% if Ottawa signed a trade deal with China. Trump attributed a 25% tariff hike on South Korean goods to the country’s legislature failing to codify a trade agreement reached with the US last year. Trump had earlier threatened to slap new charges on European countries’ goods over his quest to seize control of Greenland. He then backed off.
Meanwhile, the yen’s gains remained in focus after comments from Japanese officials fueled speculation that the government may intervene in the market to prevent the currency from resuming its slide. To some, however, the recent rally has partly neutralized the likelihood of intervention.
“The dramatic recovery in the yen suggests that actual intervention is not needed,” said Marc Chandler at Bannockburn Capital Markets.
Elsewhere, US power grids are under mounting pressure following a winter storm that unleashed deep cold and heavy snow and ice from Texas to Maine. That’s knocked an estimated 12% of US natural gas production off-line and forecasts for frigid weather caused prices to soar.
US natural gas prices jumped around 30%.
Treasuries remained in a narrow range on Monday with the Federal Reserve expected to pause its rate cuts when it announces its policy on Wednesday.
Fed officials are expected to hold rates steady following three straight cuts at the end of 2025, as a steadier jobs market restores a degree of consensus at the central bank after months of growing division. Chair Jerome Powell is likely to telegraph his view that policy is well-positioned for now, but refrain from signaling much about where rates are headed.
Expectations about Fed policy have been shifting in response to changes in the consensus view on whom Trump will nominate to succeed Powell, whose term expires in May.
“Even though the Fed isn’t expected to cut interest rates, Powell’s press conference may be as much about Fed independence as it is policy,” said Chris Larkin at E*Trade from Morgan Stanley.
