Asia Crumbles, Futures Hug 2,800 As Traders Await New Recession Signals
Following Friday's global beatdown when the 3M-10Y yield curve inverted for the first time since 2007, launching the countdown to the next recession, optimism was scarce to start the week as European shares slumped, S&P futures pointed to another day of fighting the gravitational attraction of 2,800 and Asian stocks tumbled, even as a glimmer of hope emerged in Germany where the IFO index beat expectations, helping push Treasury yields higher and the bund briefly rose above 0.00%.
The session started on the back foot, with the MSCI Asia Pacific index tumbling 2%, its biggest drop of the year, as regional stocks tracked Friday's heavy Wall Street losses, and Japan’s Nikkei hit a five-week low after diving 3.1 percent for its largest one-day percentage fall since late December. South Korea’s Kospi index declined 1.7 percent, while China shares was also in the red with the blue-chip CSI 300 index down 1.4 percent.
MSCI’s gauge of stocks across the globe slipped 0.5 percent. The gloomy mood was expected to spread to U.S. markets with S&P 500 futures skidding 0.2 percent. However, they were down as much as 0.5 percent earlier in the day.
World stocks hit a 12-day trough on Monday as fears for economic growth sent investors dashing for safe-haven assets, but the selloff lost some momentum after better-than-expected data from Germany.
A faint glimmer of hope that Europe's recession may be fading came from the Ifo Institute’s March business climate index which unexpectedly rose, printing at 99.6, above the 98.5 expected (98.7 in February).
Whereas the much discussed inversion in the 3M-10Y yield curve - the Fed's favorite leading recession indicator - on Friday stoked fears that the world’s largest economy was headed for recession, the Ifo report lent some cheer. It helped European shares - where tech shares led declines - rise off early lows. Paris traded flat, London’s FTSE was down 0.2 percent, and Frankfurt inched up 0.14 percent after the numbers. Europe’s banking as well as industrial goods & services sectors which were down 1 percent at one point, recouped losses to trade flat. But the jitters are far from over.
Futures on the S&P 500 Index decreased as much as 0.5 percent to the lowest in almost two weeks, before rebounding and hugging the 2,800 "sextuple top."
Meanwhile, the flight to safety continued around the globe, with Australia’s 10-year bond yield sliding to an all-time low and Japan’s hit the lowest since September 2016.
“Global equities were kind of complacent” as rates markets reflected growth concerns, said Marcella Chow, global market strategist at JPMorgan Asset Management in Hong Kong. “It was the release of global PMI data last Friday that shook off the complacency,” she added.
The glimmers of German economic optimism helped push spreads between U.S. three-month and 10-year Treasury yields positive. U.S. 10-year treasury yields stood at 2.47% after yields inverted for the first time since 2007 on Friday: historically a failsafe harbinger of upcoming recession.
“The bond market price action is an enormous blaring siren to anyone trying to be optimistic on stocks,” JPMorgan analysts said in a note to clients. "Growth, and bonds/yield curves, will be the only thing stocks should be focused on going forward, and it’s very hard to envision any type of rally until economic confidence stabilizes and bonds reverse."
https://www.zerohedge.com/news/2019-03-25/asia-crumbles-futures-hug-2800-traders-await-new-recession-signals
https://www.bloomberg.com/markets/stocks/futureshttps://www.dailyfx.com/crude-oil