Stocks thumb, bonds rally as US recession risk flashes "amber" by Reuters
© Reuters. Women, dressed in ceremonial kimonos, are looking at an electronic card showing the Nikkei average after the opening ceremony on the Tokyo Stock Exchange (TSE), held to wish the success of Japan's stock market, in Tokyo By Swati Pandey [1[ads1]9659004] – Investors dumped shares on Monday and fled to security for bonds, while the Japanese yen swam near a six-week high, as risk benefits fell out of favor on growing concerns about an impending US recession, and sent global returns down.
U.S .. Stock futures became negative in early Asian trading of E-minis for skidding 0.5 percent. MSCI's widest index for Asia-Pacific shares outside Japan fell 0.6 percent to a week low. Japan's tumbled 2.9 percent, South Korea's Kospi index fell 1.5 percent while Australian stocks faltered 1.3 percent.
On Friday, all three major US stock indices recorded their largest one-day percentage loss since January 3, with moving 1.8 percent, S&P 500 of 1.9 percent and Nasdaq dropping 2.5 percent.
Concerns about the health of the world economy increased last week after cautious comments from the US Federal Reserve sent 10-year treasury dividends to the lowest since early 2018.
Adding to the fear of a more widespread global decline, production data from Germany a contraction for the third straight month. And in the US, preliminary production and service activity measures for March showed that both sectors grew at a slower pace than in February, according to data from IHS Markit.
In return, 10-year government bonds sank during the three-month rate for the first time since 2007. Historically, a reverse yield curve – where long-term prices fall below short-term – signaled a coming downturn.
"We have re-run our preferred yield curve low-inflation models, which now suggest a 30-35 percent chance of a US recession happening over the next 10-18 months," said Tapas Strickland, marketing strategist at National Australia Bank.
Usually, a 40-60 percent probability looks down over the next 10-18 months, Strickland adds by basing the analysis on previous setbacks.
"The risk of a US recession has risen and is blinking yellow, and this will keep market prices highly likely for Fed cut rates."
As bonds matured on Monday, the yield on 10-year Japanese government bonds increased to minus 8 basis points, the weakest since September 2016. Australian 10-year dividends went to a record low of 1,756.
POLITICAL HEADWINDS
Much of the concern about global growth stems from Europe and China, which are fighting for special tariff wars with the United States.
The policy was also in focus in the US and the UK.
An almost two-year US survey found no sign of interaction between Donald Trump's election team and Russia, in a major political victory for the US president.
The long-awaited Mueller reports on Trump's campaign cooperation with Russia to help Trump's loss his democratic opponent, Hillary Clinton, marked a major milestone in the presidency as he prepares his re-election in 2020.
Political turmoil in Britain over the country's exit from the EU also remains a drag on risk benefits.
On Sunday, Rupert Murdoch's Sun newspaper on a front page said British Prime Minister Theresa May had to announce on Monday that she will stand down as soon as the Brexit agreement is approved.
The British pound was a shade lower of $ 1,3189 after three straight days of wild gyrations. The foreign exchange market fell 0.7 per cent last week.
In the foreign exchange markets, the Japanese yen – a perceived safe haven – held close to its highest since February 11. It was the last apartment at 109.95 per dollar.
The Australian Dollar, a risk game liquid ombudsman, was down for its third straight increase of $ 0.7073.
In goods, 33 cents fell to $ 58.71 per barrel. futures eased 24 cents to $ 66.79.
