A contained, targeted and exquisitely timed escalation of tariffs on US goods by China smashed investor sentiment in the USA. Major indices shed more than 2%, and the tech-heavy Nasdaq index dropped 3.4%. Oil and industrial metal markets slumped. Bonds, gold and the Japanese yen rose as investors sought safety.

China lifted tariffs on an additional $60 billion of imports, far less than the $200 billion of Chinese goods affected by the US moves on Friday. A focus on tech supply chains and agricultural exports inflicts higher political pain at a lower economic cost. The announcement from Beijing came just one hour before the opening of trade in New York, maximising market damage.

In contrast forex markets were relatively calm. The US dollar index hit a one-month low before bouncing later in the session. The Euro trod water despite Yen gains. Commodity currencies were the most affected, and the New Zealand and Australian dollars are around 0.5% lower. Crypto currencies were major beneficiaries. Ethereum jumped more than 25%, and Bitcoin traded above US $8,000 for the first time since July last year.

Asia Pacific investors are looking at a torrid opening. Nikkei futures are down 360 points, and the Australia 200 index added 54 points to yesterday’s losses. Trade issues remain front of mind, but important industrial production and retail sales numbers from both China and the US over the coming 36 hours will present evidence of the impact of the trade dispute so far.