Friday, 20 September, 2019

Dow Suffers Worst Day Of Year On Recession Fears

Donald Trump Enlarge Image Donald Trump Getty Images
Russell Knight | 17 August, 2019, 04:42

Bond prices jerked up and down through the morning, much like markets around the world.

Trump said in the radio interview that "we had a couple of bad days" on the stock market but "we're going to have some good days because we had to take on China".

American consumers appear to be carrying the USA economy in their shopping carts as manufacturing slumps amid President Donald Trump's trade conflict with China, and financial signals warn of a possible recession.

The major USA stock indexes spent much of the day reacting to big moves in US government bond yields, which fell sharply in the early going, fluctuated for much of the day, and then recovered some of their decline by mid-afternoon. "Every central bank around the world is trying to prop up economies and every politician around the world is trying to destroy economies".

The US manufacturing sector, which declined in the first two quarters of the year, putting it in recession, slumped again in July and is now down 1.5 percent this year, the Federal Reserve reported.

Tariff sensitive chipmaker, which staged a comeback a day earlier, were also down.

The Dow dropped by 3 percent, more than 800 points, Wednesday after fears of a recession emerged.

The yield on two-year and 10-year Treasury bonds inverted for the first time since June 2007.

"(It was a) great headline but further analysis may eventually create uncertainty and weaken markets", Carter said.

Bonds have been under pressure, however, as risk-adverse investors have fled to them for safety - driving down yields.

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Historically, such bond movements have been a reliable indicator of possible recessions, and preceded the last global downturn more than 10 years ago.

In fact, the last time the US curve inverted, in 2007, was just before the economic crash in 2008.

Traders are betting on a one-in-five chance of a 50 basis point interest rate cut from the Federal Reserve, while expecting aggressive easing from the European Central Bank at its policy meetings in September. Raised too much & too fast.

The president said the "spread" of interest rates between the USA and its competitors "is way too much as other countries say THANK YOU to clueless Jay Powell and the Federal Reserve".

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

"This is what everybody on Wall Street, except the Fed, believes should be happening now", he said.

After being hopeful earlier this year that a trade agreement may be imminent between the world's two largest economies, investors are increasingly digging in for the tensions to drag on for years. After the markets closed Wednesday, Bank of America had fallen more than 4 percent, Citigroup 5.28 percent and JPMorgan 4.14 percent.

"China is not our problem, though Hong Kong is not helping", Mr. Trump tweeted, referring to civil unrest in the special administrative region.

As of September previous year, the USA central bank had a relatively rosy outlook for the economy, expecting that the stimulus from the Trump administration's massive $1.5tn tax cut package and spending in 2018 would sustain growth and justify steadily higher interest rates.

In an interview scheduled to air on Fox Business Network on Friday, former Fed chief Janet Yellen said she felt the U.S. economy remained "strong enough" to avoid a downturn, but "the odds have clearly risen and they are higher than I'm frankly comfortable with".

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