The safe haven yen and Swiss franc surged as crowded carry trades unraveled, while the torrent of selling triggered circuit breakers in some exchanges across Asia.

Nasdaq futures sank a deep 2.9 percent, while S&P 500 futures dropped 1.6 percent. EUROSTOXX 50 futures fell 0.8 percent and FTSE futures 0.5 percent.

Japan's Nikkei shed an eye-watering 8 percent to hit seven-month lows, marking its biggest three-session loss since the 2011 financial crisis. MSCI's broadest index of Asia-Pacific shares outside Japan lost 2.8 percent.

Chinese blue chips were a rare gainer with a rise of 0.2 percent, aided by a bounce in the Caixin services PMI to 52.1.

Japanese 10-year bond yields fell a steep 17 basis points to the lowest since April at 0.785 percent, as markets radically reconsidered the prospect of another hike from the Bank of Japan.

Treasury bonds were in demand with 10-year yields hitting 3.723 percent, the lowest since mid-2023.

Two-year yields dropped to 3.818 percent, having already fallen 50 basis points last week, and could soon slide below 10-year yields, turning the curve positive in a way that has heralded recessions in the past.

The worryingly weak July payrolls report saw markets price in a near 70 percent chance the Federal Reserve will not only cut rates in September, but ease by a full 50 basis points. Futures imply 115 basis points of cuts in the 5.25-5.5 percent funds rate this year, and see rates around 3 percent by the end of 2025.

"We have increased our 12-month recession odds by 10pp to 25 percent," said analysts at Goldman Sachs in a note, though they thought the danger was limited by the sheer scope the Fed had to ease policy.

Goldman now expects quarter-point cuts in September, November, and December.

"The premise of our forecast is that job growth will recover in August and the FOMC will judge 25bp cuts a sufficient response to any downside risks," they added. "If we are wrong and the August employment report is as weak as the July report, then a 50bp cut would be likely in September."

Analysts at JPMorgan were even more bearish, subscribing a 50 percent probability to a US recession.

"Now that the Fed looks to be materially behind the curve, we expect a 50bp cut at the September meeting, followed by another 50bp cut in November," said economist Michael Feroli.

"Indeed, a case could be made for an inter-meeting easing, especially if the data soften further — although Fed officials might worry about how such a move could be [mis]interpreted."

SEEKING SAFE HARBORS

Investors will get a read on employment in the service sector from the ISM non-manufacturing survey due later Monday and analysts are hoping for a rebound to 51.0 after June's unexpected slide to 48.8.

This week has earnings from industrial bellwether Caterpillar and media giant Walt Disney, which will give more insight into the state of the consumer and manufacturing. Also reporting are healthcare heavyweights such as weight-loss drugmaker Eli Lilly.

The huge drop in Treasury yields had also overshadowed the US dollar's usual safe-haven appeal and dragged the currency down around 1 percent on Friday.

On Monday, the dollar was off another 2.2 percent on the Japanese yen at 143.10, while the euro was holding firm at $1.0934.

The Swiss franc was a major beneficiary of the rush from risk, with the dollar diving 1 percent to six-month lows at 0.8495 francs.

"The shift in expected interest rate differentials against the US has outweighed the deterioration in risk sentiment," said Jonas Goltermann, deputy chief markets economist at Capital Economics.

"If the recession narrative takes hold in earnest, we would expect that to change, and the dollar to rebound as safe-haven demand becomes the dominant driver in currency markets."

Investors had also increased wagers other major central banks would follow the Fed's lead and ease more aggressively, with the European Central Bank now seen cutting by 67 basis points by Christmas.

In commodity markets, gold gained a safety bid and rose to $2,456 an ounce.

Oil prices edged up amid concerns about a widening conflict in the Middle East, though worries about demand had seen it sink to eight-month lows last week.

Brent gained 18 cents to $76.99 a barrel, while US crude rose 11 cents to $73.63 per barrel.