U.S. Treasury bond rates are the deepest upside-down in 12 years
According to the statistics of the Securities Times and Databao, the yield of 10-year Treasury bonds has fallen by more than 15% in the past two weeks. The yield of 10-year Treasury bonds has reached a new low since November 2016. At one time, the yield of 10-year Treasury bonds was 40 basis points lower than that of 3-month short-term Treasury bonds. The rate of interest rate upside-down was the highest since 2007.
The large upside-down of long-term and short-term Treasury bond interest rates usually means that the market is pessimistic about long-term economic growth expectations and recession signals appear in the economy. At the end of last year, the long-term and short-term interest rate upside-down of US Treasury bonds occurred again after 10 years, and the S&P index pulled back more than 20%, triggering a big discussion about the US recession and the end of the bull market. After the deterioration of interest rate indicators in the past two weeks, the bearish tone about the future trend of the U.S. economy and stocks has reappeared.
According to a survey of economists conducted by Bloomberg from August 2 to 7, economists generally believe that the possibility of a recession in the next 12 months will increase in the context of increased global trade tensions and economic uncertainty, with an expected increase from 31% to 35%. Economists expect the U.S. economy to grow by 2.3% this year, down from 2.5% in a Bloomberg survey in July, and growth in the third quarter is expected to fall to 1.8%, down from 3.1% in the first quarter and 2.1% in the second quarter.
Some analysts remain optimistic about the future trend of U.S. stocks. Analysts at JPMorgan Chase believe that the market may regain its previous highs after U.S. stocks stabilize in the short term. The analysis points out that the current macro environment is far from perfect, but the macro fundamentals may prove that the stock price rise is reasonable. The performance of service industry and new economy is relatively good, and the performance guidance of most important macro enterprises is also better than expected.
Britains economy receded for the first time in nearly seven years
Statistics released on Friday showed that British GDP fell 0.2% in the second quarter of this year, the first contraction since the fourth quarter of 2012. The contraction of the UK economy is related to the uncertain rise of its exit from Europe and the slowdown of global economic growth.
Boris Johnson, the backbone of the de-Europeans, succeeded Teresa May as British Prime Minister in July. He argued that Britain must complete its de-Europeanization by October 31, even at the cost of non-agreement de-Europeanization. With the increased risk of a no-agreement exit from Europe, the pound further accelerated its depreciation. The pound has now fallen to 1.2027 against the dollar, down 8.7% from its high three months ago, to its lowest level in nearly two and a half years.
Bank of England President Mark Carney warned that a no-agreement exit could damage all sectors of the economy and that the pound could continue to depreciate. Agence France-Presse reported that British government agencies predicted in July that if Britain leaves Europe without an agreement, it might fall into an economic recession lasting one year.
Global Stock Markets
This week, with the exception of Brazil and India, the worlds major market indices fell across the board, with the Asia-Pacific market leading the way. Shenzhen Chengdu Index, Hang Seng Index, Shanghai Index and Korea Composite Index fell more than 3%, with a larger decline. Among them, the escalation of trade frictions between Korea and Japan accelerated the decline of the Korean stock market, with the Korea Composite Index hitting a new low since the second half of 2016 on Tuesday.
Interest rate cuts continue in the context of slowing global economic growth. New Zealand, Thailand, India, the Philippines and Peru announced interest rate cuts this week, and more than 20 countries announced interest rate cuts this year.