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You can find the current article at its original source at https://www.theguardian.com/business/live/2019/aug/14/germany-economy-shrinks-gdp-recession-uk-inflation-stock-markets-business-live
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Markets slide as Germany faces recession, and US and UK yield curves invert – business live | Markets slide as Germany faces recession, and US and UK yield curves invert – business live |
(32 minutes later) | |
Bloomberg’s Michael McDonough makes a good point -- who will get the blame if America slides into recession? | |
Many economists would point to the US-China trade war, which has disrupted the global economy and contributed to the slowdown. | |
President Trump, though, has already blamed the US Federal Reserve for raising interest rates too high (nine times since the financial crisis ended), and being too slow to respond (it’s first cut in a decade came last month) | |
Recession Probability Measures: (If in the end there is a recession, triggered by an escalating trade war, will it be known as the "Trump recession" or will blame somehow be placed on the Fed? I imagine this would matter a lot ahead of 2020) pic.twitter.com/tw2VbLKX0S | |
The Fed’s next meeting is on September 17-18th, where it could lower borrowing costs again. | |
But Steen Jakobsen, Chief Economist & CIO at Saxo Bank, claims the Fed might have to unleash an emergency rate cut to calm the markets. | |
He told clients today that the Fed is behind the curve: | |
The only way to “move” market now in my opinion being moving between scheduled meetings. | |
They need to produce faster or more. Both is likely, but by faster would be my choice! Rip off the band aid. | |
Here’s a video clip of White House trade advisor Peter Navarro predicting hefty cuts to US interest rates this autumn: | |
#NEW Peter Navarro says interest rates most likely to be cut 50 bases points in September and 25 in December [toatl of 75 and maybe in reverse order]Also, @realDonaldTrump to remove certain tariffs for the holiday season. pic.twitter.com/eZ6gZmxB4C | |
Wall Street is showing a distinct reluctance to bounce. | |
Stocks are ploughing new lows, with the Dow now down 660 points or 2.5%. | |
Dow tumbles more than 660 points or 2.5% to fresh session low; Nasdaq falls nearly 3% https://t.co/JdC6tKkvoU pic.twitter.com/JXXUSYvvH5 | |
Today has seen investors scramble desperately into safe-haven assets, such as government bonds and gold, and out of the risky stuff including oil and shares. | Today has seen investors scramble desperately into safe-haven assets, such as government bonds and gold, and out of the risky stuff including oil and shares. |
That’s driven bond yields to record lows (Germany’s benchmark 10-year bund fell deeper into negative yield territory), and pushed stock markets to their weakest point in several months. | That’s driven bond yields to record lows (Germany’s benchmark 10-year bund fell deeper into negative yield territory), and pushed stock markets to their weakest point in several months. |
It’s all doom and gloom in the bond markets as investors flee into safe-haven assets. pic.twitter.com/bHp8Xp3u1a | It’s all doom and gloom in the bond markets as investors flee into safe-haven assets. pic.twitter.com/bHp8Xp3u1a |
European stock markets have fallen close to their lowest level in six months, with Germany’S DAX hitting a four month low tonight. | European stock markets have fallen close to their lowest level in six months, with Germany’S DAX hitting a four month low tonight. |
European equities smoked today:European Closing Prices:#FTSE 7147.88 -1.42%#DAX 11492.66 -2.19%#CAC 5251.3 -2.08%#MIB 20020.28 -2.53%#IBEX 8522.7 -1.98% | European equities smoked today:European Closing Prices:#FTSE 7147.88 -1.42%#DAX 11492.66 -2.19%#CAC 5251.3 -2.08%#MIB 20020.28 -2.53%#IBEX 8522.7 -1.98% |
Newsflash: Britain’s FTSE 100 stock index has just closed, down 103 points at 7,147. | Newsflash: Britain’s FTSE 100 stock index has just closed, down 103 points at 7,147. |
That’s its lowest closing level since March this year, and means the index has lost over 400 points since the start of August. | That’s its lowest closing level since March this year, and means the index has lost over 400 points since the start of August. |
Engineering firm Melrose was the top faller, down 5.75%, followed by mining group Evraz (-5.2%). Holiday group TUI and airline group IAG, which would also suffer in a recession, lost 4.3%. | Engineering firm Melrose was the top faller, down 5.75%, followed by mining group Evraz (-5.2%). Holiday group TUI and airline group IAG, which would also suffer in a recession, lost 4.3%. |
In the City, the FTSE 100 is being dragged lower and lower too. | In the City, the FTSE 100 is being dragged lower and lower too. |
The index of top London-listed shares has now lost 134 points, or 1.85%, falling to 7,116 points. That’s its lowest in over two months. | The index of top London-listed shares has now lost 134 points, or 1.85%, falling to 7,116 points. That’s its lowest in over two months. |
Fiona Cincotta, senior analyst at City Index.co.uk, says fears of a global downturn are stalking the markets: | Fiona Cincotta, senior analyst at City Index.co.uk, says fears of a global downturn are stalking the markets: |
Doom and gloom dominated after data showed that Chinese industrial output grew at the slowest pace in 17 years, whilst the German economy contracted. | Doom and gloom dominated after data showed that Chinese industrial output grew at the slowest pace in 17 years, whilst the German economy contracted. |
Recession warning bells rang out across the markets as Trump’s delaying of tariffs on some Chinese imports is a case of too little too latte – the damage to economies has already been done. | Recession warning bells rang out across the markets as Trump’s delaying of tariffs on some Chinese imports is a case of too little too latte – the damage to economies has already been done. |
Ouch! The Dow has now slumped deeper into the red, down 2.25% or 591 points at 25,688. | Ouch! The Dow has now slumped deeper into the red, down 2.25% or 591 points at 25,688. |
Major US indices are hitting new daily lows as the 10yr-2yr yield curve inversion has investors spooked: #DJIA -591, #SPX -65 | Major US indices are hitting new daily lows as the 10yr-2yr yield curve inversion has investors spooked: #DJIA -591, #SPX -65 |
Here’s a reminder that inverted yield curves don’t IMMEDIATELY lead to recessions; it can take a year or more. | Here’s a reminder that inverted yield curves don’t IMMEDIATELY lead to recessions; it can take a year or more. |
Some historical context for inversions and recessions https://t.co/bnju2XDr98 pic.twitter.com/vX66R9zPRz | Some historical context for inversions and recessions https://t.co/bnju2XDr98 pic.twitter.com/vX66R9zPRz |
Investors have been snapping up long-term US government debt today, sending the yield (interest rate) on 30-year Treasury bills to record lows (meaning prices are at record highs). | Investors have been snapping up long-term US government debt today, sending the yield (interest rate) on 30-year Treasury bills to record lows (meaning prices are at record highs). |
As Treasury yields continue to move lower, the 30-Year Treasury yield declined to a record low today. #treasuryyield #recordlow #flighttosafety pic.twitter.com/eWgAuYpNI5 | As Treasury yields continue to move lower, the 30-Year Treasury yield declined to a record low today. #treasuryyield #recordlow #flighttosafety pic.twitter.com/eWgAuYpNI5 |
A US recession may be approaching, but it might not actually arrive for a couple of years. | A US recession may be approaching, but it might not actually arrive for a couple of years. |
So argues Seema Shah, chief strategist at Principal Global Investors, who predicts the downturn could be delayed until 2021, if central bankers take action. | So argues Seema Shah, chief strategist at Principal Global Investors, who predicts the downturn could be delayed until 2021, if central bankers take action. |
She writes: | She writes: |
“The US economy is clearly weakening and risks are piling up. Capex will inevitably slow further, but under the assumption that the trade war doesn’t escalate further, it will not weaken so much as to tip the US into recession. The Fed pivot in early 2019, global central bank easing, China stimulus and the reversal of its deleveraging process will support the global economy. Certainly our own recession risk model suggests that while the probability of a US recession has increased, it still isn’t our central scenario. | “The US economy is clearly weakening and risks are piling up. Capex will inevitably slow further, but under the assumption that the trade war doesn’t escalate further, it will not weaken so much as to tip the US into recession. The Fed pivot in early 2019, global central bank easing, China stimulus and the reversal of its deleveraging process will support the global economy. Certainly our own recession risk model suggests that while the probability of a US recession has increased, it still isn’t our central scenario. |
“Notably the historical success of the yield curve as a recessionary signal is too strong to dismiss. However, the lead time of its signalling can be several years, so it is our best bet that while recession is unlikely in 2020, the following year may be a fairer bet as concerns about leverage in the corporate debt maker start to come to the fore. Even so, there are certainly enough risks globally to prompt investors to take reasonable defensive positioning in their portfolios right now. | “Notably the historical success of the yield curve as a recessionary signal is too strong to dismiss. However, the lead time of its signalling can be several years, so it is our best bet that while recession is unlikely in 2020, the following year may be a fairer bet as concerns about leverage in the corporate debt maker start to come to the fore. Even so, there are certainly enough risks globally to prompt investors to take reasonable defensive positioning in their portfolios right now. |
Mohamed A. El-Erian, chief economic adviser at Allianz, says this morning’s weak German GDP report has helped to drive bond yields down today. | Mohamed A. El-Erian, chief economic adviser at Allianz, says this morning’s weak German GDP report has helped to drive bond yields down today. |
He also cites poor Chinese industrial data released overnight, showing the smallest rise in factory output since 2002 -- another sign of economic slowdown. | He also cites poor Chinese industrial data released overnight, showing the smallest rise in factory output since 2002 -- another sign of economic slowdown. |
Again this morning, lots of talk in #markets about government #bond yields as2-10 curves invert in the UK and US (chart);New record low for the US long bond;The 10-year US yield falls to 1.60% and Germany to minus 0.64%; andThe stock of negative-yielding bonds reaches $16 tr. pic.twitter.com/eRuilPtja7 | Again this morning, lots of talk in #markets about government #bond yields as2-10 curves invert in the UK and US (chart);New record low for the US long bond;The 10-year US yield falls to 1.60% and Germany to minus 0.64%; andThe stock of negative-yielding bonds reaches $16 tr. pic.twitter.com/eRuilPtja7 |
These yield moves reflect in part yet another set of weak economic data out of #China and #Germany. The dynamism of #IndustrialProduction in China is the most muted for 17 years; #Retailsales there also disappointed; and The German #economy contracted in the last quarter. pic.twitter.com/abW4WO2jCP | These yield moves reflect in part yet another set of weak economic data out of #China and #Germany. The dynamism of #IndustrialProduction in China is the most muted for 17 years; #Retailsales there also disappointed; and The German #economy contracted in the last quarter. pic.twitter.com/abW4WO2jCP |