Investors in the US panicked themselves into a rout overnight. President Trump labelled himself “tariff man” and bond markets clearly signalled growth concerns. The rush for the exits occurred despite stronger manufacturing and employment data, steady commodity markets and a relatively benign European session. Asia Pacific investors are looking at an ugly start to trading, although key data across the region may soothe some concerns.

The yield on five year US treasuries remained below two year yields as concerns about the impact of slowing fiscal stimulus gripped investors. US indices shed 3% to 4% and trading volumes were well above average. Financials led the market lower but industrials, IT and consumer discretionary sectors also tumbled, indicating fear of a slower local economy rather than international concerns.

The US dollar gyrated through an extended trading range, closing higher against commodity currencies but lower against the safe haven Japanese yen.

Services PMIs in China, Japan and Australia may do little to stem the alarm, even if they exceed forecasts of ongoing expansion. Similarly if Australian GDP data shows better than expected annual growth of 3.3% it may not be enough. The more defensive positioning of regional markets could help.

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