Global equities retreated sharply yesterday after China escalated its trade war with the US. Last week, Donald Trump had ramped up the pressure with new tariffs and warned China not to retaliate, but Beijing has defied the President by imposing extra charges on $60bn of American goods.

America’s S&P 500 and Dow Jones indices both fell 2.4% on Monday, with stocks with Chinese exposure among the biggest fallers. Apple, for example, dropped 5.8%. Asian markets were also affected, adding to significant losses last week, when the Shanghai Composite index receded 4.5%.

Sentiment in the US was also adversely affected by an inversion in the Treasury yield curve between three-month and ten-year rates. It is considered to be a warning signal for a potential recession, and it was the second time it had appeared in only a matter of days. Wall Street declined 2.1% last week.

The FTSE 100 made less drastic losses and has effectively made them up today, aided by sterling trading lower against the dollar despite positive UK employment data that was released this morning. Britain’s labour market has tightened further, with unemployment edging down to 3.8% in the first quarter and bettering forecasts that it would stay at 3.9% - already the lowest mark since 1975. At the same time as employment is rising, the number of vacancies is also increasing.

Meanwhile, Downing Street has insisted that Theresa May will cling on to Brexit talks with the opposition despite warnings from senior Tories that Labour’s demands could cause a damaging split in the Conservative party. Some cabinet ministers have told the Prime Minister that if the UK stays in the customs union, Labour’s central demand, it would be a betrayal of the party’s “loyal middle”.

As well as US Treasuries, other sovereign bond yields have also been affected by the recent escalation in the trade war. UK Gilt yields suffered their biggest weekly fall in seven weeks last week, while German 10-year Bund yields hit six-week lows.

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