Adam Samson and Ian JohnstonOil sold off and the bond market flashed a warning sign over the trajectory of the US economy on Tuesday as recession fears gripped global markets.
Citigroup commodities strategists said on Tuesday that a recession was “increasingly likely”. In that scenario, they said the oil price could reach $65 a barrel by the end of this year and $45 by the end of 2023, assuming Opec and its allies do not intervene in the market. In a sign of the deteriorating long-term economic outlook, yields on 10-year US government bonds slumped below those on two-year notes for the third time this year. So-called “inversions” of the yield curve have preceded every US recession in the past 50 years, not immediately but within the subsequent two years.
Equities prices were also under pressure, with the US blue-chip S&P 500 down 0.9 per cent and Europe’s Stoxx 600 falling 2.1 per cent.