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March 26, 2019

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Asian markets plunge on concern over US outlook

Asian markets plunged yesterday after a sharp sell-off on Wall Street fueled by concerns about the global economy and a possible recession in the United States.

After a broad-based rally since the start of the year built on hopes for China-US trade talks and a more dovish Federal Reserve, dealers have been spooked by signs of a worldwide slowdown.

US and European equities went into reverse on Friday as the yield on 10-year Treasury bonds fell below those for three-month notes.

That was the first time this had happened since before the global financial crisis in 2007.

This so-called inverted yield curve shows investors are more willing to buy long-term debt — usually considered higher risk — as they consider the short-term outlook more risky.

The yield curve is closely watched since it has inverted prior to recessions in recent decades. The rush to the 10-year US bond market followed weak manufacturing data out of the US, eurozone giant Germany and France.

That came days after the Fed’s announcement that it was unlikely to lift interest rates this year owing to unease about the US and global economy.

“Realistically, the European data has generally been poor for most of the year anyway,” said OANDA senior market analyst Jeffrey Halley.

“So this in itself isn’t news. The US data has been middling. But both confirm what everyone already knew, the global economy is slowing down after a 10-year quantitative-easing-induced bull run,” he added, referring to the massive program of post-crisis stimulus.

All three main indexes on Wall Street ended sharply down Friday, while London and Frankfurt both finished 2 percent off.

The losses filtered through to Asia this week.

Tokyo was hammered 3 percent yesterday as the yen, which is considered a safe haven in times of turmoil, held on to Friday’s advance against the dollar.

“Investors should be prepared for a tough week as we close out March and the first quarter,” warned Neil Wilson, chief market analyst at

“The bond market has been trying to speak for a while now but it’s been shouted down by the equity market rally — until now.”

Yesterday, a survey by the National Association for Business Economics found US economists were growing increasingly concerned about the US outlook, cutting their growth forecasts and warning that the chances of recession were increasing.

On currency markets, the pound was facing pressure with Prime Minister Theresa May’s political future hanging in the balance as she looks to push her Brexit deal through parliament for a third time.


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