European and US investors abandoned shares and fled to bonds as trade talk hardened, and the scope of any eventual agreement widened. Washington sought further restrictions on Chinese technology companies, while Beijing decried “wrong practices” by the US. Neither side seems likely to give ground to restart the talks, and investors are now pricing a larger drag on global growth.

Crude oil prices dropped by 6%. Increasing inventories and slumping US manufacturing activity exacerbated trade related concerns about global demand. West Texas Intermediate crashed through support at $60 a barrel, breaking a five month up trend. Oil traders point to these technical factors as an indication of further falls to come in the near term.

Investors sought haven. Global ten-year bond yields dropped to their lowest levels in more than a year. Gold shook off recent weakness, and the Japanese yen gained around 1%.

The British pound continued its slide, touching levels just above US $1.26, well down from levels closer to $1.32 seen just three weeks ago. Reports that Prime Minster May is preparing to resign effective June 10 rattled forex traders. Some interpreted the political turmoil as a sign that a hard Brexit is more likely.

Unsurprisingly futures markets are pointing to a negative start for Asia Pacific trading. However the falls are relatively modest and the weaker trading yesterday may mean regional shares are more defensively positioned.

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