Marking Worst Day for Stock Market As Dow plunges 800 points and Asian stocks fall
Signs of a global economic slowdown roiled the markets on Wednesday as shares dived and investors fled to bonds with such intensity that short-term yields rose above longer-term ones for the first time since the crisis of a decade ago – an inversion many market-watchers saw as a strong signal of an approaching recession.
Markets were shaken by a pair of reports out of Asia. China has to take necessary counter-measures to the latest U.S. tariffs on $300 billion of Chinese goods, the finance ministry said the U.S. tariffs violate a consensus reached by leaders of two countries and get off the right track of resolving disputes via negotiation.
The selling continued in Asia on Thursday with the Nikkei down 1.38% and the benchmark Australian market suffering its worst day since last October by dropping 2.74%.
Losses were more modest in Shanghai and Hong Kong and shares in London and New York were on course to bounce back on Thursday.
One big piece of news came when the yield on 10-year U.S. Treasury notes dipped below the yield of two-year U.S. Treasury notes, a rare occurrence described by market watchers as an “inverted yield curve.” The 30-year U.S. Treasury bond also hit a new record low on Wednesday.
While an inverted bond yield curve is a classic warning sign of a recession – having preceded every economic decline in the past 60 years – some experts, including former Fed chief Janet Yellen, believe that a US recession can still be avoided.
The S&P 500 also fell by more than 85 points and the Nasdaq slid by more than 240 points.
The downturn in the markets came a day after the Dow closed up 373 points after the U.S. Trade Representative announced a delay in many of the import taxes imposed by the Trump administration’s planned tariffs on Chinese goods.
This week, Trump decided to delay tariffs on certain Chinese goods while outright removing some items from the tariff list, a move to avoid any negative impact on the holiday shopping season. The announcement sent the Dow rallying more than 300 points on Tuesday. Those gains were lost in the big sell-off Wednesday.
His comments came just days after he threatened to levy tariffs on about $300 billion of Chinese goods, extending existing tariffs.