Left Menu
Development News Edition

GLOBAL MARKETS-Stocks, oil plunge on growing signs of global slowdown

Reuters | Updated: 15-08-2019 00:43 IST | Created: 15-08-2019 00:42 IST
GLOBAL MARKETS-Stocks, oil plunge on growing signs of global slowdown
Image Credit: Pixabay

Equity markets tanked and oil prices fell sharply on Wednesday after a closely watched bond indicator pointed to the growing risk of a U.S. recession that was heightened by data showing Germany's economy in contraction and China's worsening. Yields on two-year U.S. Treasury notes rose above the 10-year yield for the first time since 2007, a metric known as an inversion that is widely seen as a classic recession signal.

A GDP report showing German output fell 0.1% in the second quarter from the previous three months coupled with Chinese industrial production rising at its weakest pace since 2002 added to investor fears of a global slowdown in growth. U.S. stocks fell almost 3% and major equity indices in Europe closed down 2% or near that while crude prices slumped almost 5% at one point.

The yield on the benchmark 10-year U.S. Treasury note fell below 1.6% to its lowest since September 2016, as investors sought safety from the equity market carnage. "The combination of those three things (yield inversion, Germany's GDP and Chinese industrial production) has refreshed fears of a global slowdown," said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

"We're seeing that flow through to stock prices falling and yields across the globe plummeting as well," he said. The slide in equity and oil markets erased the previous session's sharp gains after the United States moved to delay tariffs on some Chinese products.

China's offshore yuan gave up some early gains as the weaker-than-expected data tempered optimism generated on Tuesday by the U.S. decision to delay raising tariffs in September. MSCI's gauge of global equity performance fell 1.98% and its emerging market index fell 0.59%. The FTSEurofirst 300 index of leading European shares closed down 1.62%.

The Bovespa index fell more than 3% and the Mexican bolsa slid 2%. Bay Street in Toronto fell 1.75%. Negative interest rates from the European Central Bank and Bank of Japan are creating an adverse effect on yields everywhere, including the United States, Arone said.

"How much more can U.S. interest rates rise in the face of all those low interest rates? In a lot of ways it's almost like the medicine continues to make the patient more sick," he said. The market rout is likely due, at least in part, to program trading that was triggered by the yield inversion, said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

"This level of sell-off is primarily driven by institutional program trades," he said. "Moves of this magnitude are mostly driven by programs that are tied to" the inverted yield curve. On Wall Street, the interest-rate sensitive bank index slipped 4.22% and the broader financial sector fell 3.36%.

The dollar index added 0.17% and the euro fell 0.3% to $1.1138. The Japanese yen strengthened 0.77% versus the greenback at 105.91 per dollar. U.S. West Texas Intermediate (WTI) crude futures dropped $1.87 to settle at $55.23 a barrel, having gained 4% in the previous session, the most in just over a month. London Brent fell $1.82 to settle at $59.48 a barrel.

U.S. gold futures settled up 0.9% at $1,527.80. "There is plenty of doom and gloom to spread across the globe," said John Doyle, vice president for dealing and trading at Tempus Inc in Washington. The U.S. yield curve "is a major recession indicator. Germany, Italy and the UK are likely headed for a recession. Today's Chinese data was shockingly bad."



Canada’s COVID-19 pitfalls highlight need for integrated health information system

In the globalized world of today where outbreaks can spread far and wide within a matter of days, a global-level integrated health information system is ideal but Canadas provincial barriers show that the country lags much behind in deployi...

Pandemic must be impetus, not obstacle, for clean water access

To make matters worse, there are suspicions that the inadequacy of wastewater treatment methods in California, the rest of the USA, and indeed around the world may help to propagate the disease even more widely. ...

3D printing and the future of manufacturing post COVID-19

The on-demand, customizable, and localized manufacturing of product components facilitated by 3D printing has the potential to redefine manufacturing but there are certain technical, mechanical, and legal limitations that, unless ...

How UK’s 'best prepared' healthcare system failed to gauge COVID-19

The UK is proud of their public health system and its unlike any other country as around 90 percent of British public supports the founding principles of National Health Service. But without accurate data being available to stakeholders in ...


Latest News

Mamata raises issue of financial dues to WB during COVID-19

Chief Minister Mamata Banerjee Tuesday raised the issue of West Bengals financial dues from the Centre during a video conference on the pandemic and urged Prime Minister Narendra Modi to ensure that the Centre issues guidelines on which vac...

AIM launches SEP 2.0 for young innovators of Atal Tinkering Labs

Atal Innovation Mission AIM, NITI Aayog, in collaboration with Dell Technologies today launched Student Entrepreneurship Programme 2.0 SEP 2.0 for young innovators of Atal Tinkering Labs ATLs.Following the outstanding success of SEP 1.0, th...

Bindi Irwin announces she's pregnant, expecting first child with husband Chandler Powell

Australian TV personality Bindi Irwin has announced on Tuesday that she and husband Chandler Powell are expecting their first child together, nearly five months after tying the knot. The 22-year-old star made the announcement on Instagram a...

Amarinder pitches Punjab as ideal investment destination

Punjab Chief Minister Amarinder Singh on Tuesday pitched the state as an ideal investment destination and invited industry stalwarts to gauge for themselves the conducive industrial climate. He was addressing a virtual meeting with indust...

Give Feedback