Larger than expected US jobless claims and more tough words from Beijing and Washington rattled market sentiment overnight. Although fear around the global growth outlook rose, the support of central banks remains in investors’ sights, and asset classes responded in different ways.

Sentiment remains sensitive to any potential trade dispute between the US and China. The finger pointing about the Covid-19 outbreak from both sides raises concerns that the phase-one trade agreement is in danger. Any optimism was undermined by still weak European and US PMIs, and a sharper than expected increase in US jobless claims.

White House economic advisor Larry Kudlow sought to re-assure markets on both fronts. He claimed the trade deal remains “intact”, and that the third quarter would bring record growth to the economy. Falls of 0.5% to 1% in major stock indices suggest the comments were cold comfort. Only three of the thirty Dow stocks rose. The support for McDonalds, Home Depot and Boeing indicates a defensive mindset among buyers.

Cross-market action once again displayed incoherence. Bonds rallied, but gold and the US dollar fell. The Japanese yen is essentially unchanged. The disparate performance of safe haven markets is partly explained by historic levels of central bank support, but is also an indicator of uncertainty.

Asia Pacific trading is off to a muted start, although New Zealand retail sales data released this morning recorded a lower drop than expected. Japanese inflation was also lower than forecast on worse than expected energy prices. Futures indicate opening falls of around 0.25% for Singapore and Japan, and about 0.5% in Australia, Hong Kong and Shanghai.