Asian stocks closed in the red on Monday on growing worries of an economic slowdown. European and American stocks are likely to follow suit.
Stocks dropped considerably in Asia as investors reacted to disappointing manufacturing information from Germany on Friday and a warning signal that a US economic crisis could be on the horizon. Japan’s Nikkei (N225) was down 3 percent on Monday, while Hong Kong’s Hang Seng (HSI) shed 2 percent.
Fears about a severe worldwide financial slowdown hit stocks in Europe and the United States on Friday. The pain continued Monday, with benchmark indexes in Europe opening with losses of approximately 0.5 percent before recuperating slightly. US futures were also showing loses.
The brand-new bout of fretting over the health of the worldwide economy follows a noteworthy rebound in stock exchanges.
Economic slowdown drives investors to safe haven assets
Depressed data from the US and Europe, combined with a mindful tone from the Federal Reserve, frightened investors last week.
Friday’s selloff was amplified following the yield curve inversion, adding fuel to investors’ concerns about an economic slowdown.
The bonds, referred to as Treasuries in the United States, are released as a kind of borrowing by governments to fund spending.
For the first time in more than ten years, the rate of return (yield) on three-month United States bonds rose above 10-year yields, something which is seen as a sign that a recession might be looming.
Neil Wilson, primary market analyst at Markets.com, explained, “Global stocks have taken a battering in the last couple of sessions as bond yields have sunk across the board,” including, “The slide in yields last week was a red flag for equities; the bond market loudly proclaiming that it’s not confident about the growth outlook.”
Can trade talks conserve falling stock indexes?
Analysts said that the result of the trade war between the United States and China is more considerable for stocks in Asia than the shift in the US bond market.
Jeffrey Halley, a Singapore-based analyst at online trading platform Oanda kept in mind, “A deal or no-deal” over trade in between Washington and Beijing “remains the only real game in town,”
Leading US officials are on edge ahead of talks with their Chinese counterparts in Beijing beginning Thursday. A Chinese delegation is set up to go to Washington for further discussions in early April.
Negotiations had been on hold as the two sides tried to determine how to overcome arguments about how the United States would make sure China is complying with any deal. United States worries about how China goes about getting hold of American intellectual property and trade tricks have also been a sticking point.