Global stocks slumped to more than two-month lows in early Asian trade on Thursday, tracking the Wall Street slide as an inverted US bond yield curve sent a flashing warning to investors about rising recession risks.
Yields on 10-year US Treasury notes fell below the two-year yield, intra-day, for the first time since 2007, in what is known as a yield curve inversion and widely seen by investors as a sign that a recession is coming.
Asia shares sank at the open with Japan's Nikkei average tumbling 2.0 percent and Australian stocks falling 1.9 percent.
The MSCI ACWI, which incorporates readings of 49 equity markets across the world, shed 2.1 percent to its lowest level since June 4, while E-Mini futures for the S&P 500 lost 0.1 percent in early Asia.
“The yield curves are all crying timber that a recession is almost a reality and investors are tripping over themselves to get out of the way as economic recession hurts corporate earnings and stocks can drop as much as 20 percent,” said Chris Rupkey, chief financial economist at MUFG Union Bank.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.4 percent in early trade.
All three major US indexes closed down about 3 percent, with the blue-chip Dow posting its biggest one-day point drop since October, major equity indices in Europe closed down 2 percent or near that while crude prices slumped almost 5 percent at one point.
Economic data from China and Germany suggested a faltering global economy, hit by the worsening US-China trade war, Brexit and geopolitical tensions.
Senior US officials said on Wednesday China has made no trade concessions after US President Donald Trump postponed the 10 percent tariffs on over $150 billion worth of Chinese imports, the latest sign that efforts to reach a trade deal were going nowhere.
Major currencies were relatively calm, with the dollar index rising 0.2 percent and the euro adding a marginal 0.1 percent to $1.1144. The Japanese yen strengthened 0.1 percent versus the greenback at 105.83 per dollar, having firmed 0.8 percent on Wednesday.
Oil prices shed 3 percent on Wednesday after fresh Chinese and European economic data revived global demand fears and US crude inventories rose unexpectedly for the second week in a row.
In early Asian trade, US West Texas Intermediate (WTI) crude futures dropped 0.7 percent to $54.82 a barrel, having lost 3.3 percent in the previous session.
Gold rose over 1 percent on Wednesday as an inverted US Treasury yield curve and weak eurozone data drove investors toward safe-haven bullion.Spot gold stood at $1,516.55 per ounce early Thursday, flat on the day and not far from its six-year high marked Tuesday.