World stock markets down on global growth concerns

LONDON: Stock markets slid on Monday, with Asia taking the heaviest hit, as investors took flight on mounting fears of a sharp global economic slowdown. Investors shrugged off news that an investigation found no evidence of collusion between US President Donald Trump›s election campaign and Russia.

Dealers have been spooked by growing evidence of a slowdown, after a broad-based rally since the start of the year that was built on hopes for China-US trade talks and a more dovish Federal Reserve.

«Concerns over the health of the global economy heat up at a rapid pace,» said analyst Jameel Ahmad at traders FXTM.

In Europe key stock markets were lower, with London the weakest performer, while Wall Street also got off to a softer start.

Eurozone losses were capped by the closely-watched Ifo index that showed recovering confidence among Germany›s business leaders in March after six months of decline.

 Tokyo›s main stocks index was hammered 3.0 per cent, while Hong Kong and Shanghai both dived two per cent, as concerns festered also over a possible recession in the United States, dealers said.

“Despite a miserable session for Asia, European markets are managing to avoid heavy losses,”noted IG analyst Chris Beauchamp.

“The risk-off mood at the end of last week seemed dramatic, and was perhaps justified given the sudden shift in the economic outlook, but a better reading from the German Ifo index has provided some reason for optimism,» he added.

US and European equities had tumbled Friday as the yield on 10-year Treasury bonds fell below those for three-month notes − the first time this had happened since before the global financial crisis.

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.

“This development will psychologically encourage further anxiety and rocket fears that the global economy is heading for another downturn, if recent economic releases across the globe have not already provided indications that the downturn has arrived,” added analyst Ahmad.

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 on Friday.

Oil prices slipped on Monday, with concerns of a sharp economic slowdown overshadowing support from tighter supply due to Opec›s production cuts and US sanctions on Iran and Venezuela.

Brent crude oil futures were at $66.94 per barrel, down 9 cents or 0.13 per cent at 1355 GMT, while US West Texas Intermediate (WTI) futures were at $58.73 per barrel, down 31 cents, or 0.53 per cent.

Both crude oil price benchmarks closed down last week after briefly hitting their highest since November 2018

Meanwhile, gold rose on Monday as investors› appetite for riskier assets faded on concerns about a potential US recession and decelerating global growth, increasing appeal for the bullion alongside yen and bonds.

Spot gold was up 0.2 percent at $1,315.98 per ounce as of 0610 GMT, while US gold futures gained 0.3 percent to $1,315.70 an ounce.

The metal last week posted its third consecutive weekly gain and rose 1 percent, the most since the week ended Feb. 1.

Investors dumped shares and fled to the safety of bonds, while the Japanese yen hovered near a six-week high.

«Market is in a risk aversion mode. It seems that the data from Friday night, of US and Europe, didn›t come as expected,» said Michael McCarthy, chief market strategist, CMC Markets.

Data on Friday showed that US manufacturing activity unexpectedly cooled in March and businesses across the euro zone performed much worse than expected this month, fanning concerns on global growth.

Yields on benchmark US 10-year treasury notes fell further below three-month rates in Asia, an inversion that has in the past signalled the risk of economic recession. The yield curve inverted on Friday for the first time since mid-2007.

Separately, US economists are less optimistic about the outlook and sharply lowered their growth forecasts for this year, amid slowing global growth and continued trade frictions, according to a survey published on Monday.

And while the odds of a recession by 2020 remain low, they are rising, the National Association for Business Economics said in their quarterly report.

The panel of 55 economists now believe «the US economy has reached an inflection point,» said NABE President Kevin Swift.

The consensus forecast for real GDP growth was cut by three tenths from the December survey, to 2.4 per cent after 2.9 per cent expansion in 2018. The economy is expected to slow further in 2020, with growth of just 2 per cent, the report said.

Three-quarters of respondents cut their GDP forecasts and believe the risks of to the economy are weighted to the downside.

Agencies