Global stock sell-off pauses as investors catch breath

Tumbling stock markets and rallying Treasuries have steadied somewhat in Europe as a modicum of calm returned to markets after the previous day's dramatic moves when the Nasdaq had its biggest one-day fall in more than two years.

Europe's broad Stoxx 600 index was flat in early trading on Tuesday, Asia Pacific-ex Japan shares, which had been down 1.75 per cent earlier in the day, were last just 0.5 per cent lower, and US share futures were up 0.3 per cent.

This was in stark contrast with Monday, when investors' concerns about a potential economic slowdown were exacerbated after President Donald Trump in a Fox News interview talked about a "period of transition" and declined to rule out a recession.

The S&P 500 fell 2.7 per cent on Monday, its biggest one-day drop in 2025, while the Nasdaq slid 4.0 per cent, its biggest single-day percentage drop since September 2022.

Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities, said most traders had previously believed Trump would blink if stocks tanked.

"Markets have now gotten the memo that the administration is intent on ripping the band-aid off. Tariffs and recession may be the medicine to create disinflation and getting that 10-year yield lower. For now it's a controlled demolition."

Meanwhile, a rush to US Treasuries saw the yield on benchmark US 10-year notes fall 10 basis points on Monday its largest daily move in almost a month. It was another 2 basis points lower on Tuesday at 4.12 per cent.

The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell to a five-month low and was last down 1.5 bps at 3.88 per cent.

Traders are now pricing in 85 bps of easing from the Fed in 2025, compared with 75 bps on Monday, LSEG data showed, betting weak US growth will compel the Federal Reserve to start easing again.

Wednesday's US consumer price index could scuttle those expectations if it confirms that inflation is still a problem.

Investors are mindful of February's hotter-than-expected data that saw inflation rise 0.5 per cent in January, its biggest monthly gain since August 2023.

February's CPI is expected to have climbed 0.3 per cent, according to a Reuters poll.

In currency markets, safe havens remained in demand, but moves were less dramatic than the day before.

The Japanese yen reached its strongest in five months against the dollar before giving up gains to trade flat at 147.2.

Still, the yen is up seven per cent against the dollar in 2025.

The euro also strengthened 0.6 per cent to $US1.10898.

In commodities, oil prices were steady as investors grappled with worries that US tariffs would slow economies around the world and hurt energy demand while OPEC+ ramps up its supply.

Gold prices rose to $US2,908 per ounce, within touching distance of the record high hit last month.

Gold is up 10 per cent so far in 2025 after climbing 27 per cent in 2024.