Flat stocks, bond yields down, all eyes on central banks By Reuters

By Tom Wilson

LONDON (Reuters) – Global stock markets remained unchanged on Wednesday, in the hope that central banks in the world's largest economies could temper the slowdown in global growth, even as bond yields continued to mark fears. from a recession.

European stocks, which broke Tuesday for four consecutive days on Tuesday, remained stable, but shares of banks rose 1% following comments by European Central Bank Governor Mario Draghi, who announced increased aid to banks via a cheap loan program.

German 10-year yields, already below zero per cent since Friday, have fallen further into negative territory, while the US bond yield curve has remained inverted – three-month bonds yield more than 10-year bonds – main signal of the recession has dampened risk appetite.

The reversal of the US yield curve, which preceded every US recession of the last 50 years, led to a strong stock sale last week. The decline in yields accelerated after the US Federal Reserve ended its rate hikes.

Markets were informed of global growth risks after Chinese data showed that industrial profits declined the most since the end of 2011 in the first two months of the year. This comes after the gloomy economic data released Tuesday by Germany and the United States.

However, the MSCI global equity index, which tracks stock developments in 47 countries, fell by about 0.1%, while Chinese mainland stocks rebounded closely by 1%, while central bank stimulus expectations were strengthening.

"We believe that the reflation is still topical and we hope that the (Chinese) government will come to the rescue and give it a break," said Justin Onuekwusi, portfolio manager at Legal and General Investment Management.

"It seems to me that the markets had prized in a long-term unfavorable economic environment (interest rates) even before the central banks.They had come a long way very quickly and now they are out of breath. Overall growth seems globally reasonable, in good health, despite the slowdown, "he added.

Most market participants agree that recession fears were real but saw no sign of a significant slowdown, especially with falling interest rates. Draghi also said that the economic slowdown in the eurozone was not predicting a severe recession and that the bank could, if necessary, defer further rate increases.

"Most economic forecasts, including ours, are such that the second half should be marked by a cyclical recovery in activity, but the market has a different vision," said Peter Schaffrik, head of strategy rate quotes from RBC Capital Markets.

Previously, the broadest index of the MSCI index, composed of Asian equities out of Japan, had risen by 0.1%, while Wall Street was preparing for greater openness and a better future.

KIWI BRUISÉ

The New Zealand central bank has joined its counterparts in the United States and Europe in becoming dovish. She announced a possible reduction in interest rates, bringing the dollar down to 1.6% at its lowest level in two and a half weeks.

The move also weighed on the Australian dollar.

"The tone of the dovish surprised the market," said Thu Lan Nguyen, an analyst at Commerzbank (DE :), about the Reserve Bank of New Zealand. "Most central banks have become dovish – even those who raised interest rates have done so with a very cautious outlook on rates."

The basket of the six major currencies rose 0.1% to 96.745, based on modest gains overnight.

Brexit issues have also limited sterling movements as investors await new signs of the UK exit plan from the European Union.

Prime Minister Theresa May will address the Conservative Party's legislators to indicate a departure schedule as she tries to win support for her Brexit deal which has been defeated twice as Parliament prepares for vote on various options.

Oil prices were mixed, with futures trading up 0.2%, extending gains from the previous session, but gains were contained in the face of mounting fears over the impact of the global economic slowdown on demand.

In emerging markets, Turkey and Argentina have again expressed concerns, where currencies have fallen sharply in recent days. The tightening of liquidity in lira has increased overnight swap rates to almost 500%.

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