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

Wall Street boosted by stimulus hopes

Wall Street boosted by stimulus hopes

The major US stock indexes spent much of the day reacting to big moves in USA government bond yields, which fell sharply in the early going, fluctuated for much of the day, and then recovered some of their decline by mid-afternoon.

Weak data from Germany and China on Wednesday helped fuel a rush for safe assets like bonds and gold. And White House economic advisers see few options for reversing course should the economy start to slip.

Amid talk of a US recession, President Donald Trump is reportedly paranoid that economists are biasing their data against him to prevent his re-election in 2020, a downturn that his administration has not prepared for.

Analyst Oliver Pursche, from financial services company Bruderman, said the global picture was precarious. "Every central bank around the world is trying to prop up economies and every politician around the world is trying to destroy economies". Australia's S&P/ASX 200 inched down almost 0.1% to 6,402.40, while South Korea's Kospi fell 0.8% to 1,923.56.

Many a Wall Street trader could've used a stiff drink about then because the bond market was flashing concerns about a possible recession, with the "yield curve" inverting to its lowest levels since 2007. Both later regained some ground.

Bank stocks also took a hit. "Great headline, but further analysis may eventually create uncertainty and weaken markets". "Business Optimism is at an All Time High!"

"We could end up talking ourselves into a recession", said Jay Bryson, global economist for Wells Fargo. The tumble was due to a number of factors, including what's called an "inverted yield curve".

The CBOE Volatility index, also known as Wall Street's "fear gauge, rose 4.08 points to 21.60".

On a working vacation at his golf club in Bedminster, New Jersey, Trump has blamed the economic woes on Federal Reserve Chairman Jerome Powell's hesitation to cut interest rates. "Too bad, so much to gain on the upside!"

Zimbabwe police beat protesters defying ban
On Friday, police and soldiers searched buses, taxis and private vehicles at checkpoints and demanded identity documents. He added, "I reiterate my calls to all opposition leaders that my door remains open & my arms remain outstretched".

Signs of economic difficulty are likely to continue to weigh on the president, who won office partly on the back of pledges to strengthen the USA economy through aggressive America First trade policies. Factory output has fallen 0.5% during the past 12 months, the Fed said Thursday.

Last month, America's central bank reduced its benchmark interest rate for the first time since 2008. "And the second factor has been the Fed which, in my opinion and Donald Trump's opinion, has been way too tight".

Trump has hit back at negative forecasts and this week boasted of the health of the U.S. economy, and in a tweet Thursday blamed the media for trying to provoke a recession and damage his chances of re-election.

But if Mr Trump gets what he wants, it may come at a steep price.

And the Trump administration has essentially acknowledged that its planned 10% tariffs on $300 billion of mostly consumer goods from China would hurt US shoppers.

According to CNN, The Dow plummeted over 600 points Wednesday after being tipped off by the bond market.

The yield rose as high as 1.54 percent by late afternoon, which appeared to put some investors in a buying mood.

Warning of policies that would lead to tax increases if a Democratic candidate beats him in November 2020, Trump said the markets would have crashed if he had not won in 2016 and would do so again if he were defeated in 2020. Trump's 2017 tax cut proved so politically unpopular that many Republicans ran away from it during last year's midterms.

"Of course China wants to make a deal", Trump tweeted. The Commerce Department will publish July retail sales data Thursday, after June saw the fourth consecutive uptick in American spending, a sign that consumers are a source of strength in the US economy.

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