The week started promisingly enough, with the most hawkish comments yet from the US central bank failing to disrupt equity, bond or currency markets. In an interview with the Wall Street Journal, Federal Reserve chairman Powell said something that central bankers have not had to say for decades: that the Fed intends to raise rates until they slow economic growth, and that they are prepared to risk higher unemployment. He even raised the prospect of faster, more aggressive interest rate rises than the half-percent a month currently expected.

That markets were unfazed by his comments was a rare moment of stability, but it was not to last. A series of profits warnings by American companies sent stock markets into a tailspin, and the US indexes in particular to their lows of the year. First up was the computer networking giant Cisco Systems, whose management was unable to convince pessimistic investors that falling revenues were due to Chinese supply chain problems rather than a decline in spending among customers. But that was small beer compared with Walmart, the world’s biggest retailer, which warned that customers were switching from higher-margin discretionary purchases of goods to purchases of lower-margin essentials, such as food. Markets panicked on the news - seeing, for the first time since the inflation scare began, real evidence of a slowdown in consumer spending. Walmart’s profits warning was followed by similar announcements from a series of discount retailers in the US.

Things must be bad if even deep-discount retailers are having a hard time, and this news was all the more important because expectations for company profits had remained relatively resilient since this bear market began at the beginning of the year. As a result, the decline in asset prices during the year had been accompanied by a decline in valuations. This had offered a silver lining to investors, who could buy their favourite companies with their prospects unchanged, for less. That optimism is now in danger of subsiding, which was enough to send contagion across the Atlantic to European stock markets. Even the currently-mighty FTSE 100 fell 3% on the day.

Remarkably, however, markets then staged nearly a full recovery. Perhaps this was due to the hope that shoppers at Walmart may not carry enough economic heft to disrupt the entire economy. Moreover, sentiment appeared to be helped by an interest rate cut in China, followed by President Biden’s promise to address tariffs imposed on China, which was in turn followed by an announcement from the Chinese government of further stimulus measures. The global banking sector then surged following bullish comments by JP Morgan Chief Executive about the state of the economy and an upgrade to the firm’s profit expectations. “No recession is imminent”, seemed to be the message, and fears that banks would be hit by bad debts were banished.

Alas, this may not last. A profits warning by the owner of the internet messaging service Snapchat suggested that advertising expenditure is weakening. Whether this is restricted to the online advertising world is yet to be seen but, right now, investors are in the mood to shoot first and ask questions later.