Turmoil in global markets had investors fleeing EM and other so-called “risky” assets yesterday. Shares in developed markets also took it on the chin after China said it would hike tariffs on some US 60 bn worth of US imports. Beijing was reacting to Washington’s decision last week to impose new duties on some USD 200 bn worth of Chinese imports.

The EGX30 closed down 1.5% yesterday in moderately heavy trading (by Ramadan standards) — total turnover came in at EGP 686 mn, or about 43% higher than the average since 2 May. US markets had their worst day of the year so far, with the S&P 500 down 2.4% and Nasdaq off 3.4%. European markets also closed in the red yesterday, while the FTSE All World Index was off 1.9%, sliding to its lowest level since March.

Asian shares were still sliding at dispatch time this morning in heavy trading, with equities in Japan, China, Hong Kong, Korea, India, Australia and New Zealand all in the red.

Emerging-market currencies got whacked: The MSCI EM currency index fell 0.5% to its lowest level since January early yesterday morning on concerns about what the trade dispute could mean for global economic growth, the FT reported. And JPMorgan shifted its position on EM currencies to a small underweight in response to the breakdown in talks, Reuters says. “A change of course in trade negotiation is against consensus and warrants reducing EM risk further given overweight positions,” analysts said in a note.

The “fear index” jumped 30% yesterday. The Cboe Volatility Index, or VIX, “tends to rise when stocks are falling and is one of several measures showing that heightened jitters are creeping through markets, with investors expecting big swings ahead,” the Wall Street Journal noted. Meanwhile, Morgan Stanley’s chief equity strategist (who correctly called the global equities sell-off of last year) says the state of affairs between the US and China has increased the likelihood of a prolonged economic downturn — and, possibly, of a recession, Bloomberg notes.

Keep an eye on the robots: As we noted yesterday, there is a risk that “computer driven funds [that] amassed big equity positions while markets were sleepy” could suddenly be “scrambling to sell their stocks and move into safer assets like treasuries” now that market volatility is back on the menu. See this Wall Street Journal piece for more — and remember that as much as USD 7.4 tn in stocks could be “subject to forced selling by passive funds during a sharp, prolonged downturn.

And on monetary policy: With no analyst willing to stick her neck out and prognosticate about when calm might be restored to markets, there is the chance that “further escalation in trade tensions could dent growth to the point where central banks consider taking additional steps to ease monetary policy,” the WSJ notes.

So it’s the end of the world, right? Probably not. As he often does, Mohamed El Erian serves as the voice of reason, writing for Bloomberg that a trade pact between the US and China is the most likely outcome. (With the caveat that tensions are less likely to dissipate the longer it takes them to agree to terms.)