US stocks have registered their biggest one-day drop of the year and bond yields plunged after China allowed the RMB to fall through a key threshold, reported the Financial Times.

In a broad-based sell-off that saw all sectors on Wall Street close lower, the benchmark S&P 500 sank to a two-month low, leaving it down 6% from its record high in July.

Demand for US government bonds, to which investors typically flock during times of trouble, pushed the yield on the 10-Treasury note sharply lower, and a bond market indicator of recessions flashed its most bearish signal since 2007.

“If the trade war escalates we may end up talking ourselves into a recession — that is the concern we’re seeing in the markets today,” said Anik Sen, global head of equities for PineBridge Investments. “There is very little visibility in any of this and that is the frustration because it keeps changing from day to day.”