Published: Sat, August 17, 2019
Markets | By Otis Pena

US recession fears stalk markets as stocks fall again

US recession fears stalk markets as stocks fall again

On Wall Street, the benchmark Standard & Poor's 500 fell 2.9% to 2,840.60.

Meanwhile, China said its factory production was the weakest in 17 years, while Germany, Europe's most powerful economic engine, said its economic output shrank in the April-to-June period by one-tenth of a percentage point.

The most unsafe thing in this situation is that market fears of a recession could end up fuelling further demand for safe havens, further intensifying the anxiety of stock markets.

Major European indexes also fell sharply Wednesday.

The U.S. Treasury yield curve temporarily inverted on Wednesday, with two-year note yields exceeding 10-year yields, signaling growing concerns over a recession in the world's biggest economy.

An "inversion" of the yield curve - the difference in the returns of two-year and 10-year U.S. government bonds - has a formidable track record of predicting American recessions.

Oil prices shed 3% on Wednesday after fresh Chinese and European economic data revived global demand fears and US crude inventories rose unexpectedly for the second week in a row.

"Yes the inversion in the past has coincided with a recession in the following 18-24 months [but] we're not talking about tomorrow".

The release of the retail figures, followed by a stabilization of stock markets, offer a less dire picture of the state of the USA economy.

Gunman wounds at least 6 Philadelphia police; 2 others freed
Wednesday's standoff started when narcotics officers tried to serve an arrest warrant, but became pinned down by gunfire. Two police officers previously inside were "safely evacuated" by SWAT personnel, Gripp tweeted at around 9:30 p.m.

The CBOE Volatility Index, widely considered as the best fear gauge in the stock market, surged 26.14 percent to 22.10 on Wednesday.

Investors have been plowing money into the safety of USA government bonds for months amid growing anxiety that weakness in the global economy could sap American growth.

For Andrew Catalan, head of long duration at fund giant Insight Investment, the Fed is not being seen as doing enough to avert a USA recession amidst the global economic downturn. "The Fed still owns roughly two trillion USA dollars of US treasuries from its quantitative easing program", Falconio told Xinhua.

That's a sign that traders have sought the sanctuary of USA government bonds amid concerns of an economic slowdown.

Harvey's 1986 dissertation showed that the yield curve inverted before four recessions. No recession occurred in 1966, even though there had been an inversion. Crucially, the yield curve also acts as a barometer for the outlook of the economy.

The curve has inverted before every recession in the past 50 years and sent a false signal just once [US/].

"Historically, it's 14 to 22 months out". Senior US officials said on Wednesday China has made no trade concessions after Trump postponed the 10 per cent tariffs on over $150 billion worth of Chinese imports, the latest sign that efforts to reach a trade deal were going nowhere.

"Better-than-expected United States data probably helped sentiment in USA stock markets, though it seems to have been largely ignored by the bond market", said Stephen Innes, managing partner at VM Markets.

"We're talking and they're offering things that are very good", he said, before following it up with a warning that Washington could respond to any moves from Beijing with "the ultimate form of retaliation". Since then, it has inverted three times, he said, each one before a recession.

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