TOKYO (Reuters) – Global stocks slumped to more than two-month lows in early Asian trade on Thursday, tracking the Wall Street slide as an inverted U.S. bond yield curve sent a flashing warning to investors about rising recession risks.
FILE PHOTO: A man uses a mobile phone in front of an electronic board showing Japan’s Nikkei average outside a brokerage in Tokyo, Japan, October 12, 2018. REUTERS/Toru Hanai
Yields on 10-year U.S. Treasury notes US10YT=RR fell below the two-year yield US2YT=RR, intra-day, for the first time since 2007, in what is known as a yield curve inversion and widely seen by investors as a sign that a recession is coming.
Asia shares sank at the open with Japan’s Nikkei average .N225 tumbling 2.0% and Australian stocks falling 1.9%.
Graphic: Asian stock markets – tmsnrt.rs/2zpUAr4
The MSCI ACWI .MIWD00000PUS, which incorporates readings of 49 equity markets across the world, shed 2.1% to its lowest level since June 4, while E-Mini futures for the S&P 500 ESc1 lost 0.1% in early Asia.
“The yield curves are all crying timber that a recession is almost a reality and investors are tripping over themselves to get out of the way as economic recession hurts corporate earnings and stocks can drop as much as 20%,” said Chris Rupkey, chief financial economist at MUFG Union Bank.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.4% in early trade.
All three major U.S. indexes closed down about 3%, with the blue-chip Dow .DJI posting its biggest one-day point drop since October, major equity indices in Europe closed down 2% or near that while crude prices slumped almost 5% at one point.
Economic data from China and Germany suggested a faltering global economy, hit by the worsening U.S.-China trade war, Brexit and geopolitical tensions.
Senior U.S. officials said on Wednesday China has made no trade concessions after U.S. President Donald Trump postponed the 10% tariffs on over $150 billion worth of Chinese imports, the latest sign that efforts to reach a trade deal were going nowhere.
Major currencies were relatively calm, with the dollar index .DXY rising 0.2% and the euro EUR= adding a marginal 0.1% to $1.1144. The Japanese yen strengthened 0.1% versus the greenback at 105.83 per dollar, having firmed 0.8% on Wednesday.
Oil prices shed 3% on Wednesday after fresh Chinese and European economic data revived global demand fears and U.S. crude inventories rose unexpectedly for the second week in a row.
In early Asian trade, U.S. West Texas Intermediate (WTI) crude futures CLc1 dropped 0.7% to $54.82 a barrel, having lost 3.3% in the previous session.
Gold rose over 1% on Wednesday as an inverted U.S. Treasury yield curve and weak euro zone data drove investors toward safe-haven bullion.
Spot gold XAU= stood at $1,516.55 per ounce early Thursday, flat on the day and not far from its six year high marked Tuesday.
Reporting by Tomo Uetake; Editing by Sam Holmes