Major global share markets fell sharply on Monday and gold surged to another new record after U.S. President Donald Trump said tariffs would essentially cover all countries, stoking worries a global trade war could lead to a recession.
Trump's comments to reporters on Air Force One seemed to dash hopes the levies would be limited to a smaller group of countries with the biggest trade imbalances.
Trump is due to receive tariff recommendations on Tuesday and announce initial levels on Wednesday, followed by auto tariffs the day after.
"What the Trump administration has shown us so far is that you should not expect a consistent approach," said George Lagarias, chief economist at Forvis Mazars.
"This is what scares the market the most. Inconsistency breeds uncertainty, and markets hate uncertainty."
Europe's STOXX 600 (.STOXX), fell 1.7% to its lowest level in almost eight weeks, while major indexes in Frankfurt (.GDAXI), , London (.FTSE), and Paris (.FCHI), fell between 1.3% and 2%.
S&P 500 futures lost over 1%, extending losses after Friday's 2% drop, while Nasdaq futures shed 1.5%.
Japan's Nikkei (.N225), led the rout in Asia, losing an eye-watering 4.1% and falling to a six-month low as automaker stocks continued to suffer fallout from Trump's talk of 25% tariffs on imported cars.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), shed 1.9%.
Seeking any safe harbour from the trade storm, investors piled into sovereign bonds and the Japanese yen and pushed gold prices to another all-time high.
"For the first time in years, we find ourselves genuinely worried about risk assets," said Ajay Rajadhyaksha, head of rates markets at Barclays.
"If policy chaos and trade wars worsen much further, a recession is now a realistic risk across major economies," he added. "For the first time in many quarters, we favour core fixed income over global equities."
THAT "R" WORD
Many economists are worried that tariffs will hit the U.S. economy hard, even as they limit the Federal Reserve's scope to cut rates by driving inflation in the short term.
Analysts at Goldman Sachs now see a 35% chance of a U.S. recession, up from 20% previously, saying they expect Trump to announce reciprocal tariffs that average 15% across all U.S. trading partners on April 2.
Data out on Friday underlined the risks as a key measure of core inflation rose by more than expected in February while consumer spending disappointed.
That raised the stakes for the March payrolls report due on Friday where any outcome below the 140,000 gain expected would only add to recession fears. Also due are a rush of surveys on factories and services, along with figures on trade and job openings.
Bond investors seemed to be betting the slowdown in U.S. economic growth will outweigh a temporary lift in inflation and prompt the Fed to cut rates by about 80 basis points this year.
This, combined with a flight from risk assets, saw the 10-year Treasury yield drop as low as 4.184% while the two-year yield hit 3.842%. Germany's 10-year yield fell as low as 2.659%, its lowest since March 5.
The outlook for rates could become clearer when Fed Chair Jerome Powell speaks on Friday, following a host of other Fed speakers this week.
The drop in U.S. yields saw the dollar ease 0.4% to 149.30 yen , while the euro held at $1.0817 . The dollar index was steady at 104.05, having slipped for the previous two sessions.
The perceived safety of gold saw the metal hit another all-time high at $3,128.06 an ounce .
Brent rose 0.8% to $74.24 a barrel, while U.S. crude added 0.4% to $69.65 per barrel as U.S. President Trump has threatened secondary tariffs on buyers of Russian oil if he felt Moscow was blocking efforts to end the war in Ukraine.