US stocks suffered one of the biggest sell-offs in recent years on Tuesday as concerns over the durability of President Donald Trump’s trade truce with China stirred fears about global economic growth.

The S&P 500 index fell 3.2 per cent, one of only eight declines of more than 3 per cent in the past five years. The Nasdaq Composite dropped 3.8 per cent, returning to correction territory — defined as a 10 per cent fall from the most recent peak.

A widely followed bond market indicator pointed to a looming economic slowdown. The yield curve — the difference between shorter and longer-term US borrowing rates — flattened to an 11-year low. An inverted curve — in which short rates are higher than long rates — has preceded every recession since the second world war.