Stocks Fall as China Raises Stakes in Trade Fight: Markets Wrap

(Bloomberg) — Global equities fell after China upped the ante in its trade dispute with the US, stirring fresh concerns over tensions between Beijing and Washington at a time when stocks look stretched after a relentless rally.

Contracts for the S&P 500 retreated 0.7% and Nasdaq 100 futures dropped 0.9% as China placed limits on five US entities tied to one of South Korea’s biggest shipbuilders and threatened further retaliation. MSCI’s Asia index declined for a third session — its longest losing streak since August — while European stocks slipped 0.4%.

Tuesday’s moves mark a third day of swings, with fears of an escalation in US–China tensions returning to the forefront. The S&P 500 has gained more than 30% since its April low, as initial trade concerns gave way to unrelenting optimism over artificial intelligence and the resumption of US interest-rate cuts.

The yen was the top performer among major currencies as Japan’s opposition parties weighed a bid to unseat the long-ruling Liberal Democratic Party. The Nikkei 225 dropped as much as 3.2%, while short-term yields fell on reduced chances of a near-term rate hike. Gold fluctuated, while silver dipped after hitting a record high.

Investors’ attention is also turning to the unofficial start of earnings season, with JPMorgan Chase & Co., Goldman Sachs Group Inc., and Citigroup Inc. set to report before the US open. This period, investors will be looking for reassurance on everything from the durability of AI spending to the fallout of tariffs.

“The China trade escalation has clearly rattled markets,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. “With elevated valuations already making markets vulnerable, expect continued volatility.”

Alongside trade worries, the surge in AI stocks is stoking bubble fears. In an October Bank of America Corp. survey, 54% of investors said tech valuations look stretched, with concerns over global equity prices also at a record.

Still, some strategists said bouts of volatility are to be expected at current valuations, but the overall environment remains supportive for stocks.

“We continue to see the macro backdrop as supportive of risk with a resilient economy, Fed cutting rates and ample liquidity on the sidelines,” wrote Mohit Kumar, chief strategist for Europe at Jefferies International. “Trade wars and tariffs do generate headlines and uncertainty, but we see the eventual impact as limited.”

What Bloomberg strategists say…

“At a time when just about every corner of the market is awash in frothy valuations, the latest tensions give traders a reason to take some money off the table. Equity market complacency is writ large in volatility pricing as well, with the VIX Index looking abysmally low in relation to what the rest of this quarter may bring.”

— Ven Ram, Macro Strategist. For the full analysis, click here.

Elsewhere, cryptocurrencies extended their declines after a wave of historic liquidations sparked a sharp weekend selloff.

Bitcoin, the largest token by market value, fell as much as 3.75% to around $111,500, while Ether dropped 7.5% to below $4,000. Smaller, more volatile tokens fell even further, wiping out more than $150 billion from the total cryptocurrency market value in 24 hours, according to CoinGecko data.

Brent crude fell toward $62 a barrel, extending the year-to-date decline to more than 16%, after the International Energy Agency said the record oil glut will be larger than previously estimated.

Corporate News:

Michelin shares fell after the tiremaker lowered its financial guidance for the year following a bigger-than-expected sales slump in North America. BP Plc said a weak oil trading performance hit the company’s profit while production increased for a second straight quarter. Samsung Electronics Co. reported its biggest quarterly profit in more than three years in a sign of healthy AI chip demand, though investors hoping for outsized numbers cashed in some of the company’s recent stock market gains. Some of the main moves in markets:

Stocks

The Stoxx Europe 600 fell 0.4% as of 10:08 a.m. London time S&P 500 futures fell 0.7% Nasdaq 100 futures fell 0.9% Futures on the Dow Jones Industrial Average fell 0.4% The MSCI Asia Pacific Index fell 1.4% The MSCI Emerging Markets Index fell 1% Currencies

The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.1% to $1.1558 The Japanese yen rose 0.1% to 152.07 per dollar The offshore yuan fell 0.1% to 7.1484 per dollar The British pound fell 0.4% to $1.3278 Cryptocurrencies

Bitcoin fell 3.3% to $112,048.54 Ether fell 6.7% to $4,005.49 Bonds

The yield on 10-year Treasuries declined two basis points to 4.01% Germany’s 10-year yield declined four basis points to 2.60% Britain’s 10-year yield declined six basis points to 4.60% Commodities

Brent crude fell 2% to $62.07 a barrel Spot gold rose 0.7% to $4,138.68 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Anand Krishnamoorthy and Sagarika Jaisinghani.

©2025 Bloomberg L.P.