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Opening Bell: Stocks, Yields Plunge As Global Recession Risk Roars Back

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewAug 14, 2019 05:05AM ET
www.investing.com/analysis/opening-bell-stocks-yields-plunge-as-global-recession-risk-roars-back-200454927
Opening Bell: Stocks, Yields Plunge As Global Recession Risk Roars Back
By Investing.com (Pinchas Cohen/Investing.com)   |  Aug 14, 2019 05:05AM ET
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  • U.S. futures, European shares tumble on dismal economic data from China, Germany
  • Yields edge toward lowest level since Oct. 2016
  • Yen and gold rise, oil drops as lowest Chinese industrial output in 17 years reignites risk-off

Key Events

Treasury yields, European shares and futures on the S&P 500, Dow and NASDAQ 100 tumbled in unison this morning after worrying economic data from China and Germany overshadowed a pause in U.S.-China trade jitters, reawakening the specter of a global recession.

The STOXX 600 fell with banks stocks, with Deutsche Bank (DE:DBKGn) and Banco Comercial Portugues (LS:BCP) leading losses after Germany reported a 0.1% contraction in second-quarter GDP, from 0.4% growth in the first quarter, with a trade war-driven fall in exports as the direct culprit of the tumble.

The German data flop followed another key red flag from China, where both retail sales and industrial output readings vastly missed expectations—with the latter growing at the slowest pace in 17 years.

When the largest economy in the eurozone falls back into negative growth and a crucial economic indicator in the second largest economy in the world hits a near two-decade low, investors’ recessionary fears inevitably spike.

Global Financial Affairs

All these come a day after U.S. President Donald Trump delayed the 10% duties on $300bn of Chinese consumer goods and China confirmed it was staying on track for September talks, sending U.S. stocks to their biggest jump in two months.

Dow Daily Chart
Dow Daily Chart

Despite the much-celebrated rally, equities found resistance by the top of a bearish flag, which remained intact. Note, the flag develops right on the uptrend line since the Christmas-Eve selloff.

VIX Daily Chart
VIX Daily Chart

The VIX traded according to a pennant shaped consolidation above the levels of most of the year’s volatility since the aftermath of the December rout.

Today's reversal only highlights how unreliable extreme gains can be in this market environment.

China’s Shanghai Composite still managed to seal a 0.42% climb in the early Asian session, as investors clung onto Wall Street’s trade-relief rally.

UST Hourly Chart
UST Hourly Chart

Meanwhile, the yield on 10-year Treasurys erased all of yesterday’s gains, falling to one basis point away from the lowest level since Oct. 2016. Technically, on the hourly chart, rates may have completed a H&S top.

The yen pared a small portion of yesterday’s risk-on plunge. Gold also edged higher against a weakening dollar and a risk-off market.

WTI Daily Chart
WTI Daily Chart

After jumping the most since January on the apparent softening U.S.-China trade rhetoric, WTI slid on dismal Chinese data and a U.S. crude inventory buildup. Technically, the price hit the resistance of the falling channel top, where supply overcomes demand.

Up Ahead

Market Moves

Stocks

  • Germany’s DAX slid 1.2%.

Currencies

  • The Dollar Index declined 0.05%.

  • The euro increased 0.1% to $1.1185.

  • The Japanese yen gained 0.4% to 106.32 per dollar.

Bonds

  • The yield on 10-year Treasurys slipped four basis points to 1.66%.

  • Britain’s 10-year yield was unchanged at 0.494%.

  • Germany’s 10-year yield dropped one basis point to -0.62%.

Commodities

  • West Texas Intermediate crude dipped 1.2% to $56.43 a barrel.

  • Gold fell 0.1% to $1,500.38 an ounce.

  • Iron ore increased 2% to $88.55 per metric ton.

Opening Bell: Stocks, Yields Plunge As Global Recession Risk Roars Back
 

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Opening Bell: Stocks, Yields Plunge As Global Recession Risk Roars Back

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abdul attia
abdul attia Aug 14, 2019 11:14AM ET
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How bad can it get? Where is the bottom?
Mojo Snake
Mojo Snake Aug 14, 2019 8:46AM ET
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And yesterday we were saved...... Who could have seen this coming.  No warnings at all.  LOL
Pinchas Cohen
Pinchas Cohen Aug 14, 2019 8:46AM ET
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Saved? You're about to get slaughtered.
Edwin Jr Morataya
Edwin Jr Morataya Aug 14, 2019 8:46AM ET
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Thats actaully not true... people who watched the yield curve noted that it was going to invert with it happened today and good news overshadowed it so yeah today was the reaction... im confused because the 3 month and the 10 year have been inverted since may and nobody seemed to care that much
Pinchas Cohen
Pinchas Cohen Aug 14, 2019 8:46AM ET
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Edwin Jr Morataya I have written a series of posts about the falling yield and inverted yields since Dec.The big deal about the 2 year inverting, after the 3 month has already been repeatedly doing so for a while is complex: (1) smart money did care about the 3 month. (2) In fact, it is a more reliable indicator of a recession ahead and is the choice of institutions.(3) The 3-month was this time more sensitive than the 2-year because of the irregular dynamic of a Fed reversing while in drive amidst a tightening cycle for the loosest monetary policy in history. (4) The current panic is building upon the 3 month already having been inverted and the 10-year reaching the lowest since Oct. 2016, while the 30-year fell to the lowest on record. Hope that makes sense.
Sonu Kumar Sah
Sonu Kumar Sah Aug 14, 2019 7:42AM ET
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pound Gbp usd when will be go up
Abdussalam Ismail
Abdussalam Ismail Aug 14, 2019 7:42AM ET
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Hello my friend
Pinchas Cohen
Pinchas Cohen Aug 14, 2019 7:42AM ET
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Not a clue
 
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