Global stocks hurt by China's trade threats, falling bond yields

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As has the bid in the U.S. 30-year Treasury, which is now trading below 2% - a new record low, with the hunt for (quality) bonds, with any positive "real" yield rolling on like a juggernaut. This is perceived as a signal of an nearly imminent recession in the coming months, as over the past 50 years it provided only one false signal of such outcome. The inversion has previously been a reliable indicator of economic recessions.

Investors have been plowing money into the safety of U.S. government bonds for months amid growing anxiety that weakness in the global economy could sap growth in the U.S. Uncertainty about the outcome of the U.S. trade war with China has spurred a return of volatility to the stock market in August - the Dow has dropped more than 5 percent and the S&P 500 is down more than 4 percent. That erased the previous day's gains from a rally that began after President Donald Trump delayed tariffs on about $160 billion in Chinese goods due to take effect on September 1.

The "yield curve" refers to how interest rates on Treasury bonds change with the maturity of those bonds.

European shares opened higher and futures flagged a 0.5% rise on Wall Street, where all three indexes fell 3% on Wednesday after an inversion of US government bond yields sparked fears that the world's biggest economy would hurtle towards recession, dragging the rest of the globe with it.

Roughly, the interest rate on a long-term bond should be the average interest rate on short-term bonds that will prevail during the term of the long bond, plus a "term premium" to compensate the lender for risks associated with lending on fixed terms for a long period. The stock market, which fell 800 points today, looks pretty distressed too. The S&P 500 .SPX gained 7 points, or 0.25%, to 2,847.6 and the Nasdaq Composite .IXIC dropped 7.32 points, or 0.09%, to 7,766.62. Crucially, the yield curve also acts as a barometer for the outlook of the economy.

Asia shares sank at the open with Japan's Nikkei average tumbling 2.0% and Australian stocks falling 1.9%.

"We should easily be reaping big rewards and gains, but the Fed is holding us back", Trump said.


"We're outside of the earnings season and markets are being batted around by news".

Trump placed the blame for the "crazy inverted yield curve" squarely on the USA central bank, which he believes raised interest rates too quickly.

Still, oil prices fell on Thursday to extend steep overnight losses as USA crude inventories unexpectedly rose, fears of recession mounted and economic data out of China and Europe disappointed.

"Historically, it's 14 to 22 months out. There are still companies succeeding in this environment, and that's going to cause the market to go back and forth", Meckler said. Raised too much & too fast.

Bond prices move in the opposite direction to yields and so as investment increases, the price jumps and yields fall. This was after the vitamins and supplements maker slashed its final dividend by 55 per cent, as its full-year profit dropped 23.6 per cent to $53.4 million.

On the other hand, the currency market avoids sharp dynamics. Brent crude, used to price global oils, fell 40 cents to $59.08 per barrel in London. It dipped on Wednesday by 0.2% to $1,512 per ounce but stayed near its recent $1,534 high. Although it is also great for bond investors. France's CAC 40 fell 2.2 percent, and the FTSE 100 in London lost 1.7 percent. The euro edged up to $1.1142 from $1.1138.

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