Treasury performance, world economy, currencies in the spotlight



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US stocks fell sharply on Friday, a reverse yield curve fueling fears of an economic recession on the horizon. Disappointing economic data released Friday outside Europe, coupled with the waning economic outlook of the US Federal Reserve, added to these concerns.

The gap between the 3-month Treasury bill and the 10-year note became negative on Friday for the first time in more than a decade. Investors consider that "there is a signal that a recession may soon occur."

A group of strategists described the reversal of the yield curve as "the greatest development of the financial markets for some time".

"While we prefer the measure of the yield curve less ten years to two years to predict US economic recessions twelve to eighteen months in advance, the inversion of the dozens curve of bills is a worrying sign, "said strategists from the Commonwealth Bank of Australia said in a morning note.

"At this point, we do not expect a recession in the United States, but we have already concluded and published that the tightening cycle of the Fed is over," they said.

A reverse yield curve occurs when short-term rates exceed their long-term counterparts, dampening the benefits of bank loans. An inverted curve is also considered a recession indicator.

The US dollar index, which tracks the greenback versus a basket of peers, was at 96.651 after rebounding from lows below 96.3 in the previous session.

The Japanese yen, widely seen as a safe haven, rallied to 109.81 against a dollar against more than 110.6 last Friday. The Australian dollar has changed hands at 0.7073 USD after peaking above 0.714 USD last week.

Meanwhile, Washington's top US officials are also expected to visit Beijing later this week to resume trade talks with China.

China and the United States are expected to reach an agreement by April, with uncertainty over the two-economy trade struggle weighing on investor sentiment for much of 2018.

Oil prices plummeted during the morning hours trading in Asia, the futures contract on the Brent International benchmark, Brent, yielding 0.87% to 66.45 dollars a barrel. US futures also fell 1.00% to 58.45 dollars per barrel.

– Fred Imbert of CNBC contributed to this report.

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