US stocks have dropped in a broad sell-off as simmering geopolitical tensions spooked equity investors and drove a bond market rally, while the protracted US-China trade war stoked fears of an impending recession.

All three major US stock indexes closed sharply lower in light trading, with little to soothe market jitters over Hong Kong protests, Argentine President Mauricio Macri’s primary election defeat, and the US-China tariff dispute that has rattled markets for months.

The flight from risk sent gold prices up one per cent on Monday, hovering at a more than six-year high. The closely watched yield spread between US two-year and 10-year notes narrowed to its smallest difference since at least 2010, according to Refinitiv data. Goldman Sachs Group said on Sunday its economists see recessionary risks increasing as the US-China trade war drags on. Data on inflation, housing starts and retail sales are due later in the week and will be scrutinised for further signs of economic softening.

The Dow Jones Industrial Average fell 391 points, or 1.49 per cent, to 25,896.44, the S&P 500 lost 35.96 points, or 1.23 per cent, to 2882.69 and the Nasdaq Composite dropped 95.73 points, or 1.2 per cent, to 7863.41. All 11 major sectors of the S&P 500 ended the session in negative territory, with financials, materials, energy and consumer discretionary suffering the largest percentage drops.

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