February 28, 2020
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US recession fears stalk markets as stocks fall again

Richard Drew | AP
Richard Drew | AP
Specialist Mario Picone works on the floor of the New York Stock Exchange, Wednesday, Aug. 14, 2019. The Dow Jones Industrial Average sank 800 points after the bond market flashed a warning sign about a possible recession for the first time since 2007.

LONDON — Global stock markets fell sharply again Thursday after Wall Street endured its worst day of the year as recession fears in the U.S. and around the world escalated.

Investors across financial assets have been gripped by developments in the U.S. bond market. On Wednesday they focused on the fact the yield, or interest rate, on the benchmark 10-year Treasury bond briefly dropped below the two-year Treasury’s yield for the first time since 2007.

That’s a sign that traders have sought the sanctuary of U.S. government bonds amid concerns of an economic slowdown. In the past, this so-called inversion of the U.S. yield curve has accurately predicted the past five recessions.

Traders clearly took fright at that development, with the Dow Jones industrial average dropping 800 points, or 3.1 percent, on Wednesday — its worst performance of 2019.

“The countdown to a recession has just started,” said Hussein Sayed, Chief Market Strategist at FXTM.

In Europe, Germany’s DAX was down a further 1.2 percent at 11,359 on Thursday while the FTSE 100 index of leading British shares was 1.4 percent lower at 7,051. The CAC 40 in France was 0.9 percent at 5,203. U.S. stocks were poised for modest declines at the bell with both Dow futures and the S&P 500 futures were down 0.2 percent.

Connected to the recession fears — data out of Europe and China have also been disappointing — are worries over the escalation of the trade conflict between the U.S. and China. Uncertainty about the U.S.-Chinese tariff war has been behind much of this month’s selling in stock markets. So far in August, the Dow has dropped more than 5 percent and the S&P 500 is down more than 4 percent.

Add in worries over Brexit, Italian politics and political unrest in Hong Kong and the backdrop for stock markets is about as difficult as at any time since the global financial crisis a decade or so ago.

“The fact is that no one actually knows what is next for the markets,” said Fiona Cincotta, senior market analyst at City Index. “However, the signs flashing from the markets are not great.”

Asia’s Day

Earlier in Asia, the Shanghai Composite Index gained 0.2 percent to 2,815.80 while Tokyo’s Nikkei 225 lost 1.2 percent to 20,405.65. Hong Kong’s Hang Seng closed up 0.8 percent at 25,495.46. Australia’s S&P-ASX 200 fell 2.8 percent to 6,408.10.


Benchmark U.S. crude fell another $1.03 to $54.20 per barrel in electronic trading on the New York Mercantile Exchange while Brent crude, used to price international oils, declined $1.49 to $57.99 per barrel in London.


The euro was up 0.1 percent at $1.1152 while the dollar rose 0.1 percent to 105.98 yen.


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