LONDON: Stock markets slumped on Wednesday as Germany's economy went into reverse, fuelling fears of global recession and slamming the brakes on a rally for equities after Washington delayed tariffs on some Chinese imports.
The gap between U.S. two-year and 10-year Treasury yields - a metric closely watched for signs of a slowdown - inverted for the first time since 2007, raising the specter of a global recession."The telling thing is that there is a delayed effect - traditionally you see a one-to-two-year lag before a recession. You could see it next year," said Neil Wilson, chief markets analyst at Markets.com.
The German figures - along with data showing the slowest growth for Chinese industrial output in 17 years that indicated faltering demand in the world's second-largest economy - knocked the wind out the sails for stocks and gave rise to the angst over a slowdown.Equity investors on Wall Street and in Asia had cheered earlier when U.S. President Donald Trump pushed back to December a Sept. 1 deadline for new tariffs on remaining Chinese imports.
"The trade war and the dispute between U.S. and China has already had an impact - especially when you look at countries most sensitive to global trade like Germany and even Italy," said Christophe Barraud, chief economist and strategist at Market Securities in Paris.
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