Two words in particular from the Chinese government have sent stock markets around the world sprawling amid fears of a recession in US and major European economies.
On Thursday China vowed to introduce "necessary countermeasures" after the US decision to increase tariffs on US$200 billion worth of Chinese goods.
The Ministry of Commerce said in a statement it "deeply regrets" the US decision to increase tariffs and "we'll have no choice but to take the necessary countermeasures."
The apparent escalation of the trade war led European markets lower on Thursday with markets in Britain, France and Germany all trading more than one per cent lower. US stocks were also poised for modest declines at the opening of trade, reports news.com.au.
The downbeat opening comes amid developments in the US bond market that have seen the yield, or interest rate, on the benchmark 10-year Treasury bond briefly drop below the two-year Treasury's yield for the first time since 2007.
That's a sign that traders have sought the sanctuary of US government bonds amid concerns of an economic slowdown.
In the past, this so-called "inversion" of the U.S. yield curve has accurately predicted the past five recessions. Traders clearly took fright at that development, with the Dow Jones industrial average dropping 800 points, or 3.1%, on Wednesday - its worst performance of 2019. The Australian stockmarket lost more than $63 billion.
"The countdown to a recession has just started," said Hussein Sayed, Chief Market Strategist at FXTM.
Skittish investors fear escalation of the trade conflict between the US and China, with uncertainty driving the trend towards selling stocks this month.
So far in August, the Dow has dropped more than 5 per cent and the S&P 500 is down more than 4 per cent. Add in worries over Brexit, Italian politics and political unrest in Hong Kong and the backdrop for stock markets is about as difficult as at any time since the global financial crisis a decade or so ago.
"The fact is that no one actually knows what is next for the markets," said Fiona Cincotta, senior market analyst at City Index. "However, the signs flashing from the markets are not great."
At present, expectations that the US Federal Reserve and other central banks would respond robustly to the recession warning helped world stocks to steady.
But that recovery was cut short by the latest rhetoric from Beijing
"The only game in town is the central banks, hence the bond markets are rallying," said Peter Schaffrik, global macro strategist at RBC Capital Markets.
"We have regional bonfires in Hong Kong, Argentina, Japan against South Korea, and none of these are going away easily; each and every one is not necessarily strong enough to cause trouble."
Money markets price in a growing chance the Fed will cut rates by half a point at its September meeting.
"We have seen stocks trading very poorly as a result of the yield curve inversion, so that will be flashing some additional warning lights for the Fed that they have to do more," said Andrea Iannelli, investment director at Fidelity International.
"The only question is, can the Fed out-dove the market? At the very least they will have to match market expectations in the short term."