Uncertainty about the outlook for China’s economy, lingering worries over eurozone debt and disappointing US earnings combined to pull the rug from under risk assets just as the markets were showing signs of stabilising.

The recovery in commodities following last week’s sell-off went into sharp reverse and Wall Street gave back a big chunk of the last three days’ gains. The dollar moved higher against a basket of currencies and Treasury bond prices rose. The Vix equity volatility index, widely watched as a broad measure of investor risk aversion, was up more than 8 per cent at midday in New York.

The early focus for the markets came from a swathe of Chinese economic data, which showed consumer price inflation moderating slightly in April to a year-on-year rate of 5.3 per cent from 5.4 per cent in March, while industrial production and retail sales growth slowed.