A look at the day ahead in European and global markets from Tom

Westbrook

U.S. stocks finally caught up overnight with what currency

and bond markets have been saying for several weeks: A slowdown

is coming.

The Nasdaq's 4% fall was its steepest in

two-and-a-half years. Bond yields fell sharply and markets are

now pricing in a roughly 50-50 probability of the Fed cutting

rates in May.

Tesla shares have halved since their post-election peaks and

the dollar, which had been rising in anticipation of Donald

Trump's policies, has now begun sliding as he slaps tariffs on

his neighbours.

The so-called "Trump trade" is in full retreat and the

"Trump put", or the expectation that he may be sensitive to

falls in the stock market, is so far nowhere to be seen.

Citi downgraded its U.S. asset allocation recommendation,

cutting stocks to "neutral" from "overweight" after the market

closed, saying that for the next few months at least it's not

clear that the U.S. economy's outperformance can continue.

Asian markets did their best to steady the ship, helped a

bit because it's everywhere outside the U.S. that stands to

benefit from any repatriation flows from dumped U.S. assets.

Stocks in Tokyo, Seoul, Hong Kong and

Sydney were off their early lows by the afternoon, but

the mood was skittish. U.S. equity futures also fell in early

trade and, while recovering their losses, are struggling to make

much headway beyond flat.

The scene in currency markets was quiet. The yen has been

rising for weeks and inched to a new five-month peak in the Asia

session - although, as some dealers noted, it's stocks catching

up to the move in dollar/yen rather than the other way around.

The euro, too, has shown little reaction to Germany's Greens

promising to block plans for increased military spending,

perhaps in anticipation of a compromise deal.

Key developments that could influence markets on Tuesday:

Earnings: Volkswagen, TP ICAP

Economics: U.S. Jolts