Worries about economic growth are hitting the oil price too.

Brent crude, the international benchmark, has dropped by 1.1% or nearly a dollar per barrel to $75.91/barrel, the lowest since January.

Panic selling is hitting the financial markets today, reports Kyle Rodda, senior financial market analyst at capital.com.

In a note this morning, he explains:

The markets are in meltdown and it’s a sea of red across the world. There are a lot of moving parts, but this is the essence of things: a looming slowdown in the US economy has cast doubts about global economic growth. The move has triggered a sell-off in the US Dollar and a rally in the Yen, the latter of which was boosted by the BOJ’s decision to tighten policy last week and a subsequent short-squeeze.

The rapid move in the Yen is putting downward pressure on Japanese equities, but it’s also driving an unwind of a major carry trade—investors had leveraged up by borrowing in Yen to buy other assets, chiefly US tech stocks. We are basically seeing a mass deleveraging as investors sell assets to fund their losses.

The rapidity of the move has caught a lot of investors off guard; there’s a lot of panic selling now, which is what causes these non-linear reactions in asset prices to pretty straightforward fundamental dynamics.

Japan’s yen is continuing to strenthen – which is hurting speculators and fuelling the selloff.

The yen has hit its highest level against the US dollar since the start of this year, at 142.3 yen to the dollar. Last week it traded around 154¥/$, before the Bank of Japan surprised markets by raising Japan’s interest rates last Wednesday.

That has destabilised the “carry trade” — where an investor borrows in a currency with low interest rates, such as the yen, and reinvests the proceeds in another currency, or other asset, with a higher rate of return.

That carry trade has been lucrative, as the BoJ had been reluctant to lift borrowing costs due to Japan’s weak economy.

But it’s now unwinding, fast….

Ouch ouch ouch.

Trading has just ended for the day in Tokyo, and Japan’s Nikkei 225 share index has suffered a fall of over 12%.

Japan’s benchmark Nikkei average closed down 12.40% at 31,458.42, a drop of 4,451 points, while the broader Topix shed 12.48% at 2,220.91.

According to Reuters, that’s a record daily points fall for the Nikkei, and the biggest percentage loss since the Black Monday crash of 1987.

Cryptocurrencies are also caught up in the selloff.

Bitcoin has tumbled 15% since Friday night, dropping from around $62,500 to $52,800 this morning.

Ether, used on the Ethereum network, has lost over 20%.

Goldman Sachs economists reckon there’s an increased risk of a US recession.

They have lifted their estimate for the probability of a US recession in the next year to 25% from 15%,

They told clients:

“We continue to see recession risk as limited.”

Goldman argues that the Federal Reserve has plenty of room to cut US interest rates if needed.

Bloomberg explains:

The economists added that they are skeptical the labor market is at risk of deteriorating rapidly in part because job openings indicate demand remains solid and there has been no obvious shock to spark a downturn.

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

Global investors are bracing for fresh volatility after suffering losses last week, as anxiety over the health of the US economy sweeps markets.

Stocks have tumbled in Tokyo again today, where Japan’s Nikkei 225 share index has slumped by almost 10% in late trading – hitting its lowest level since late last year, and triggering circuit breakers designed to stop panic selling.

Other Asia-Pacific markets are also falling, with South Korea’s Kospi down over 8% in afternoon trading, and Australia’s S&P/ASX 200 down 3.5%. Further losses are expected in Europe and on Wall Street today.

Appetite for taking risks has waned, after the tech-focused Nasdaq index sunk into contraction territory on Friday – closing over 10% below its alltime high.

Disappointing US jobs data on Friday added to concerns that the US Federal Reserve may have blundered by not cutting interest rates last week, and might be too late to prevent a recession. The chance of a large reduction in borrowing costs next week has surged.

Last week’s selloff came amid a flurry of key events, including:

• The Bank of Japan surprisingly raising interest rates, prompting the yen to surge.

• A weak US ISM manufacturing report, which showed factory activity contracting last month

• A jump in the number of Americans filing new applications for unemployment benefits, to an 11-month high, followed by….

• …a drop in job creation, according to July’s non-farm payroll

• Underwhelming financial results from major tech companies, which didn’t persuade Wall Street that the huge investments in artificial intelligence were paying off.

The news last weekend that Warren Buffett had cut his stake in Apple may weigh on tech stocks again this week.

Rising tensions in the Middle East hit stock markets yesterday too, as fears grew of a retaliatory Iranian attack on Israel. Saudi Arabia’s benchmark index fell by 2.4% on Sunday, and Egypt’s blue-chip index lost 2.9%.

There’s certainly plenty of fear in the system, as illustrated by Wall Street’s “fear gauge” – the Vix index of expected US stock market turbulence — which jumped last week.

As Stephen Innes, managing partner at SPI Asset Management, puts it:

It’s a bit like watching a slow-motion replay of a spill in a crowded market: you know there’s room for more chaos, but you’re just not sure how much more the aisles can take before everything’s on the floor.

How did the financial snowball start barreling downhill? It kicked off with the Yen bulking up—a move we hinted at positioning for just before the Bank of Japan (BOJ) decided to hike. This beefier Yen set off a domino effect, triggering a global unwinding of carry trades that nudged the VIX into action. Ah, the VIX, our merciless watchdog, always ready to sound the alarm.

From there, the market turmoil morphed into a full-on avalanche, propelled by not one but two vector bear assaults. And if you throw in the dismal high-tech earnings misses into the mix—well, that’s strike three. Each factor compounded the others, turning a manageable slide into a frenzied tumble down the financial slopes.

Today we will get a flurry of data from the services sector, which will show how the UK, eurozone and US economies are faring.

The agenda

• 7am BST: Russia’s service sector PMI for July

• 9am BST: Eurozone service sector PMI for July

• 9.30am BST: UK service sector PMI for July

• 3pm BST: US service sector PMI for July