European shares wilted and there was a stampede into bonds on Thursday, after the US Federal Reserve's abandonment of all plans to raise rates this year left traders wondering what might be lurking in the shadows.
World markets' reaction to a super-dovish Fed was not unlike the response to the European Central Bank's equally easy stance earlier this month -- the benefits of a reduced interest rate horizon came laced with doubts.
Banks suffered their usual worries about low borrowing rates to drag the pan-European STOXX 600 down and though a rise in metals prices and a weaker pound helped London's FTSE edge up, Wall Street futures were down 0.5 percent.
But the real action was happening in bond markets.
With investors rushing to price in the prospect of US rate cuts later this year, benchmark Treasury yields dived to their lowest since early 2018 and those on German Bunds -- Europe's benchmark -- to the lowest since October 2016.
Ten-year Bunds were offering buyers virtually nothing again at yields of just 0.048 percent while widespread curve flattening -- where shorter and longer-term borrowing costs converge -- showed alarm bells were ringing.
With central banks having already cut rates to the bone and tried full-scale money printing, investors are concerned that many are now low on traditional ammunition to fight recessions.
"The Fed has the most leeway because it has raised rates nine times so it could cut rates nine times," Rabobank strategist Philip Marey said. "But it will be much more difficult for other central banks which haven't even started to hike yet."
The Fed's swerve had sent the dollar sliding as far as 110.47 yen, with its 0.6 percent loss overnight the biggest drop since the "flash crash" of early January.
The euro flew to a seven-week peak too before things started to reverse in Europe. It was last trading at $1.1390 having tested $1.1450 overnight, but it was still a world away from its recent low of $1.1177.
Brexit worries kept the pound down at $1.3175. Britain's Prime Minister was heading into an EU meeting in Brussels having requested a delay but there still much jostling going on just over a week before Brexit had been due to happen.
That all left the dollar recovering at 96.200 against a basket of currencies, having lost 0.5 percent overnight. It was also poised precariously on its 200-day moving average, and a sustained break would be taken as technically 'bearish'.
"The downward pressure on US yields continues to support our outlook for a weaker US dollar this year," said MUFG analysts in a note.
My Way or Norway
Going against the grain, Norway's currency shot up after its central bank raised interest rates and signalled a 50-50 chance another hike will follow by mid-year.
It looked very much the exception after the Fed, the ECB and China all capitulated back towards easier monetary policy and left many in their ranks reviewing what options they will need to deploy if things continue to sour.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.5 percent.
Chinese blue-chips, which spent the morning swinging between small losses and gains, were up 0.4 percent in afternoon trade, while Seoul's Kospi also added 0.4 percent as regulators announced plans to cut the stock transaction tax this year.
Australian shares ended flat after see-sawing throughout the day. A drop in the jobless rate tempered market expectations of a rate cut.
Markets in Japan were closed for a public holiday.
Gains in the broad Asian index followed a wobbly session on Wall Street after a move toward risk-taking sparked by the Fed's dovish shift was overtaken by growth and trade concerns.
US President Donald Trump on Wednesday warned that Washington may leave tariffs on Chinese goods for a "substantial period" to ensure Beijing's compliance with any trade deal.
China-US trade talks are set to resume next week.
Global growth worries extended to commodity markets, where oil prices, which had jumped Wednesday on supply concerns, retreated.
US crude fell 0.1 percent to $60.17 a barrel after touching four-month highs on Wednesday. But Brent crude regained some ground, adding 0.15 percent to $68.60.
Weakness in oil prices is seen to be limited by efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to curb supply. Widely watched US data also showed supplies were tightening.Gold and copper gained though on the weaker dollar, with spot gold adding about 0.5 percent to $1,318.94 per ounce. Copper rose 0.9 percent to $6,517 a tonne, having touched a near three-week high earlier in the session.