A look at the day ahead in European and global markets from

Ankur Banerjee

As the next leg of the rapidly escalating trade war comes

into view, investors remain shell-shocked, extending a deep

stock market rout and flocking to the safe-haven yen and Swiss

franc, awaiting, and hoping, for some semblance of good news.

At the stroke of midnight (U.S. hours), President Donald

Trump's reciprocal tariffs took effect, including 104% levies on

Chinese goods, keeping fears of recession alive and upending a

global trading order that has persisted for decades.

Markets had pinned their hopes on negotiations, but so far

it appears that Washington and Beijing are heading for a

showdown.

That has left investors scurrying for cover as the relief

rally on Wednesday fizzled out and Asian stock markets were a

sea of red. European futures point to a significantly lower open

on the day.

So, the yen and the Swiss franc were the go-to for nervous

investors as relentless dollar selling showed no signs of

stopping. In emerging markets, the Indonesian rupiah sank

to a record low and was on the verge of breaching 17,000 per

dollar.

The yuan weakened to a 19-month low, while its

offshore counterpart inched away from the record low it

hit in wild overnight trading.

And yet, the flight to safety has not included U.S.

Treasuries. The yield on the benchmark 10-year note

was up an eye-popping 21 basis points.

That fact that sweeping tariffs could result in a recession

and markets are pricing in more interest rate cuts would

normally provide a good reason to buy bonds, but that has not

been the case.

ING economists said the 'sell America' trade is one that's

now dominating the rising recession risk theme that typically

would have pushed yields down. In short, brace yourself.

Key developments that could influence markets on Wednesday:

Tariff updates

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(Editing by Jacqueline Wong)