“Warning! US equities can occasionally go down as well as up a lot.”

That’s how Deutsche Bank’s Jim Reid begins his morning wrap note, and sure enough after months of warnings that the market has gotten way ahead of itself in pricing in the success of Trump’s various domestic policies (confused? read last week’s preview of just this event occurring from JPM), global markets are waking up to a sea of red as the US risk rout spreads, leading to a slide in European stocks for the third consecutive day led by banks and miners, Asian markets suffering their worst day of the year, and S&P 500 futures pointing to a modestly lower open again as the yen and gold rise.

The catalyst, it will come as no surprise, is the end of the Trump rally which yesterday finally ended with a bang, not a whimper, as investors questioned the U.S. president’s ability to enact his pro-growth policies, casting doubt on the so-called reflation trade. Equities dropped across the globe as safe-haven assets advanced. A rally in government bonds continued and gold and the yen both extended gains. Base metals tumbled, with iron ore approaching a bear market. Investors’ flight to safety pushed down U.S. Treasury yields. The closely watched gap between U.S. and German 10-year yields touched its narrowest since November at around 195 basis points. German 10-year yields fell further and were last down 4.8 basis points at 0.41 percent.

“Market participants are worried about the effects and feasibility of Donald Trump’s growth program,” DZ Bank strategist Birgit Figge said. 

As noted last night, bank and commodity shares led the selloff as the benchmark index in Europe fell a third day, following markets in Asia. Futures on the S&P 500, down 3% as of 6:15am ET, showed the broad US stock market index to extend its decline from Tuesday, when it sank more than 1% for the first time since October. Emerging-market stocks halted an eight-day winning streak.

The dollar touched a four-month low against the Japanese currency, whose strength helped push Tokyo stocks to a three-week low, while the euro held close to its highest since early February at around $1.08.

As Bloomberg puts it, “volatility in financial markets is soaring after a period of relative calm as concern mounts that Donald Trump’s flagship policies, which have underpinned a global rally since his election, won’t sail through Congress.” Attention will next turn to Thursday’s crucial vote on the plan to repeal and replace Obamacare; top Republicans have warned failure to pass the health-care bill could imperil tax and spending reforms.

“This bill has wide implications for President Trump’s plans for the U.S. economy as it is due to reduce government spending, with the freed up funds being used for the proposed tax cuts/reform and infrastructure spending” Rabo bank wrote in a note to clients.

Societe Generale currency strategist Alvin Tan, in London, said an FBI investigation into possible ties between Trump’s campaign and Russia was also adding to investor worries. “All in all, that’s adding to a picture that the much hoped-for and hyped fiscal stimulus package may not be coming as soon as markets would like it to come, if at all,” he said.

The dollar swung between gains and losses as a slump in stock markets spurred haven demand for the yen, while investors reduced their exposure. Risk aversion was evident in both the spot and options markets: dollar-yen was lower a seventh day, set for its longest losing streak in two months, while bearish sentiment as expressed through risk reversals touched its strongest level in six weeks. Aussie-yen, a common risk barometer, was lower by the most in three months on a two-day basis.

Refuge seeking amid equities tumble and the possibility that President Donald Trump’s fiscal policies will be delayed until Autumn didn’t result in a sharp drop for the greenback. According to Europe-based traders, quoted by Bloomberg, opposing market forces kept the greenback in consolidation mode. Some investors were seen cutting back on their longs given the currency’s latest weakness while others, mainly short-term accounts and fast-money names, faded the latest dip. The greenback as measured by the Dollar Index may be due for a rebound, a relief one at least. DeMark’s TD Sequential points to a recovery as a Buy Countdown was completed on March 17 while Wednesday price action also satisfies a Buy Setup series.

Meanwhile, in equities, the MSCI Asia Pacific Index dropped 1.4 percent as benchmark indexes in Tokyo and Sydney slid the most since Trump’s election. Japan’s Topix lost 2.1 percent as the yen rose for a seventh day, touching the highest since November.A measure of Chinese shares traded in Hong Kong lost 1.8 percent after closing at the highest in almost 17 months on Tuesday. Japanese stocks fell 2 percent, Australian shares tumbled 1.6 percent and mainland Chinese shares closed down 0.5 percent. MSCI’s main measure of emerging market equities slid nearly 1 percent.

In Europe, the MSCI Emerging Market Index fell 1 percent in its first retreat in almost two weeks. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4 percent at one point, its biggest intraday percentage fall since Dec. 15. In the previous session, the index hit its highest level since June 2015.

The Stoxx Europe 600 Index dropped 0.8 percent as of 9:51 a.m. in London, the biggest decrease in a month. The European STOXX 600 index fell 0.9% to a two-week low, led lower by banks and miners. Britain’s FTSE 100 index fell 0.9 percent.

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