Stocks plummet and bonds rebound as US recession risk begins to flash "amber"

SYDNEY (Reuters) – Investors gave up shares on Monday and fled before bond security as the Japanese yen floated near a six-week high as risky assets fell amid growing concern. by the American recession, causing a drop in global yields.

US equity futures turned negative early in Asian trading with E-minis for the S & P 500, slipping 0.5%. The broadest MSCI index of Asia-Pacific equities out of Japan fell 0.6%, reaching its lowest level in a week. Japan's Nikkei fell 2.9%, South Korea's Kospi fell 1.5% and Australian stocks fell 1.3%.

Friday, the three major US stock indexes recorded their largest percentage loss of a day since January 3: the Dow fell 1.8%, S & P 500 1.9% and Nasdaq 2 , 5%.

Worries about the health of the global economy intensified last week after cautious remarks by the US Federal Reserve put 10-year cash yields at their lowest since early 2018.

Adding to fears of a more generalized global slowdown, manufacturing output data in Germany showed a contraction for the third consecutive month. In the United States, preliminary measures of manufacturing activity and services for the month of March showed that both sectors grew at a slower pace than in February, according to data from the US. IHS Markit.

In response, yields on 10-year Treasury bills fell below the three-month rate for the first time since 2007. Historically, a reverse yield curve – where long-term rates are lower than short-term rates – has announced an impending recession.

"We have re-used our preferred yield curve recession models, which now suggest a US recession probability of 30 to 35% over the next 10 to 18 months," said markets strategist Tapas Strickland. National Australia Bank.

According to Strickland, a recession probability in the next 10 to 18 months is usually 40 to 60%, based on previous recessions.

"The risk of recession in the United States has increased and is shining day by day, which will encourage markets to keep down the rate of Fed rate cuts."

As bonds rebounded on Monday, Japanese 10-year government bond yields fell to minus 8 basis points, the lowest since September 2016. Australia's 10-year yields have fallen to a 10-year low. record low of 1.756.

POLITICAL HEADS

Much of the concern about global growth comes from Europe and China, who are fighting separate tariff wars with the United States.

Politics was also on the agenda in the United States and Great Britain.

A nearly two-year US investigation has revealed no evidence of collusion between Donald Trump's electoral team and Russia, constituting a major political victory for the US president.

The highly anticipated Mueller report on whether Trump's election campaign with Russia helped Trump defeat his Democratic opponent, Hillary Clinton, marked an important step in his presidency as he prepares for his battle for re-election of 2020.

The political turmoil in Britain following the country's exit from the European Union also continues to weigh on risky assets.

On Sunday, Rupert Murdoch's Sun newspaper announced in an editorial on the front page that British Prime Minister Theresa May was to announce his resignation Monday as soon as his agreement on Brexit was approved.

The pound was a little lower at $ 1.3189 after three consecutive days of wild gyrations. The currency slipped 0.7% last week.

On the foreign exchange market, the Japanese yen, considered a safe haven, has almost reached its highest level since February 11. It was stable at 109.95 for a dollar.

The Australian dollar, a liquid substitute for the risky game, lost $ 0.7073 for its third consecutive session of losses.

In commodities, US crude fell 33 cents to 58.71 dollars a barrel. Futures contracts on Brent fell 24 cents to $ 66.79.