That means “the central bank bar tab is running out”.

Mr Karunakaran said he was watching the credit market for cues that might prompt the Fed to pause, because it did not appear that the equity market falling was enough to have the Fed relent.

The probability of a US recession within a year has jumped to 57 per cent, according to one measure published by Bank of America Merrill Lynch based on the performance of the S&P 500 and the Treasury spread. The US 10-year Treasury yield has fallen back to 2.8 per cent.

Adding to the unease, the price of crude oil has retreated in an ominous signal for global growth amid the unresolved tariff dispute. Brent crude is trading at $US54.75 a barrel, down 35 per cent for the quarter.

A day after the FOMC meeting, which took the key US cash rate to within the neutral range for the first time this cycle, New York Fed president Bill Dudley said in a Bloomberg television interview that “somewhat tighter financial conditions aren’t really a bad thing”.

This quarter, banks globally have become a target of selling because of their leverage to the economy in light of growing confidence that growth is slowing. Wall Street banks including JPMorgan and Citigroup are down 14 and 27 per cent for the quarter, while Australia’s banking index has wiped out 12 per cent of its value.

The prospect of bypassing a partial US government shutdown appeared imperiled on Thursday when President Donald Trump declared that he would not endorse a spending bill without funding allocated to his border wall. On Friday, Jim Mattis resigned as the US defence secretary.

Markets in the Asia region awoke on Friday to a renewed risk of a partial government shutdown in the US.  J. SCOTT APPLEWHITE

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