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Anxiety over the health of the global economy are gripping markets today, sending shares sliding in Asia.
Fears of a global recession are building, following a flurry of weak economic data in recent weeks. With the eurozone economy stumbling, America’s growth slowing, and China feeling the impact of the trade war, investors are become more worried about prospects for 2019 and beyond.
David Madden of CMC Markets explains:
Overnight, stocks in Asia sold-off heavily as concerns for the health of the global economy weighed on sentiment. Heavy losses were sustained in Japan and China.
Japan’s Nikkei has plunged by 3%, as a wave of selling pushed it down 650 points to 20,977.
Hong Kong’s Hang Seng index has lost 2.1% in late trading, and China’s CSI 300 has shed 2.3%.
This follows a sharp selloff on Friday in Europe and Asia, which wiped 2% off Britain’s FTSE 100 and 1.7% off the Dow Jones industrial average.
That was triggered by the biggest fall in eurozone factory output since the euro debt crisis was raging, with Germany suffering a particularly sharp decline.
All the Brexit chatter has been about the state of the UK economy, but mainland Europe is limping along, and the bloc is looking very weak. Brussels is holding firm, but the eurozone is struggling and France and Germany would be badly impacted by a no-deal Brexit.
Traders are looking nervously at the bond market, where the US yield curve has just inverted. That’s because three-month US government bonds are now changing hand at the same yield, or interest rate, as 10-year debt.
That suggests investors are worried about US economic prospects — especially as an inverted yield curve often (but not always) heralds a recession.
European stock markets are expected to fall further today. A new survey of German business confidence, due at 9am GMT, may give investors more to worry about.
Brexit anxiety will also weigh on the City today, as prime minister Theresa May’s future looks more perilous following a crisis meeting with senior party figures yesterday.
- 9am GMT: German IFO survey of business confidence