As it often does, an event triggering a broad market reaction in one session was carried around the world to impact subsequent time zones in kind. However, this time, the news looks to be wrapping around the world twice. Yesterday morning in the European hours, BNP Paribas, France’s largest bank, announced that they were freezing redemptions from investments into two of their funds worth an estimated 1.6 billion euros because they could not fairly value their assets under current market conditions. While this seemed little different than the collapse of the Bear Stearns funds some weeks ago, this story is catching more traction in the global market because it was taken as irrefutable evidence that the imploding subprime market in the US would spread beyond its own boarders. Since the close of the New York session yesterday, things have only gotten worse.

Equity markets in Japan were reeling in the wake of losses sustained in US markets. The worst performance in brokerage shares since 2002 sent the Nikkei 225 tumbling over 400 points or 2.4 percent while the Topix plunged 3 percent to mark an eight-month low. The bug quickly spread to Europe where the FTSE 100 was down 1.8 percent while the DAX slipped 1.6 percent by 9:30 GMT. Government yields have seen equivalent declines as have the carry trades. Although officials have not sat idly by while this run on liquidity has developed, it is clear that their efforts have yet to stem the hemorrhaging. This morning, the BoJ and RBA joined the ECB and Fed in injecting much needed cash into the market in an effort to sooth fears that the liquidity well was running dry. The Japanese central bank added 1 trillion yen ($8.5 billion) to keep the machine running while the Australians pumped in A$4.95 billion ($4.2 billion). Perhaps a reflection of officials belief that this is a temporary wobble, the ECB announced it was taking bids on a new 3-day tender to replace the 95 billion euros worth of securities released yesterday that expire this morning; and this time they have not said they would except all bids – though neither have they commented on ultimate volume levels.

Meanwhile, while investors were left to concentrate on calculating the damage their accounts have sustained in this two-day sell off, a number of important indicators crossed the wires. A figure that will no doubt chime loudly on Washington’s radar was the 67 percent jump in China’s trade surplus. While the $24.4 billion gap is only the second highest on record, the impressive statistics will likely be all that politicians need to revive the protectionist rally call on the hill. It will be interesting to see whether the recent suggestion that China could use its FX reserves as a ‘bargaining chip’ will encourage less accusatory language this time around. Elsewhere, in Japan, consumer confidence sank to its lowest level since December of 2004 as absent wage growth, higher taxes, portfolio losses and missing pension records converted more pessimists. Now, with sentiment at new lows, growth expected to be a fraction of what was in the first quarter, and the BoJ trying to infuse the market with yen, that August rate hike that looked so certain a week ago is looking very doubtful.

Boris Schlossberg is a Senior Currency Strategist at FXCM.