EUROPE MARKETS: European Stocks Slide As Bond Market Issues Recession Warning
August 28 2019 - 6:22AM
Dow Jones News
By Callum Keown
European markets slid on Wednesday as investor fears grew amid
the U.S.-China trade war and the risk of a recession.
Bond yields sank close to record lows as investors sought refuge
in haven assets
(http://www.marketwatch.com/articles/the-bond-market-is-scaring-the-stock-market-again-51566984604)as
optimism over trade talks subsided and caution returned.
The Stoxx 600 fell 0.4%, while the German DAX and the French CAC
40 dropped 0.5%.
What's moving the markets?
European markets edged lower on Wednesday after the U.S.
Treasury yield curve inverted further, stoking fears of a
recession.
On Tuesday, the spread between the 10- and 2-year U.S. Treasury
yield fell to its lowest level
(http://www.marketwatch.com/story/treasury-yields-retreat-ahead-of-key-debt-auction-2019-08-27)since
before the financial crisis.
The U.S. 30-year yield slid below the 3-month bill yield for the
first time since 2007 -- another red flag for the global
economy.
U.S. equities finished lower and, as a result, European stocks
opened softer
(http://www.marketwatch.com/story/asian-markets-mostly-flat-after-us-yield-curve-inversion-deepens-2019-08-27)
on Wednesday.
Investor fears spilled over into Europe as the 10-year German
bund yield declined to -0.71%, close to record lows.
The yield on Italy's 10-year bond climbed slightly after a sharp
fall on Tuesday as talks progressed to form a new government.
Neil MacKinnon, global macro strategist at VTB Capital, said:
"Sovereign bond markets are providing a circumspect and downbeat
picture of the global economic outlook."
He added: "The global economic backdrop remains poor and global
manufacturing is contracting. A synchronized global recession is an
increasing probability."
Which stocks are active?
Fashion retailer H&M (HM-B.SK) climbed 4.6% after the
company signed an environmental pact presented at the G-7 summit
over the weekend. The Sweden-based firm was one of 32 companies,
including Prada (1913.HK), Ralph Lauren (RL) and Calvin Klein owner
PVH (PVH), to sign the "fashion pact" created by French President
Emmanuel Macron.
Thomas Cook shares plunged 15% after the travel operator agreed
a rescue deal with Chinese investor Fosun. Thomas Cook said
shareholders' interests would be "significantly diluted" by the
deal and warned it could even cancel its listing.
BP (BP.LN) rose 2.1% after the oil giant agreed to sell its
Alaska assets for $5.6 billion, which will reduce its debt pile.
Shares were also helped by rising crude prices due to a
larger-than-expected decline in U.S. oil stockpiles.
(END) Dow Jones Newswires
August 28, 2019 06:07 ET (10:07 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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