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Global markets continue to signal recession in 2019

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Global markets continue to signal recession in 2019

Post by claud39 on Mon Jan 07, 2019 7:37 am

http://economy-news.net/content.php?id=14984


Global markets continue to signal recession in 2019




07/01/2019









Economy News Baghdad

The latest economic indicators are a message to investors seeking to adjust their portfolios in anticipation of a recession by the end of 2020.
The message is that these investors should be prepared to start the economic slowdown sometime in 2019, even though stocks have enjoyed a period of temporary recovery from a long-term decline, according to an analytical view published by Bloomberg View.
The Fed's New York State index puts the possibility of a 16-percent recession in a year from now, the highest level since November 2008.
The speed with which the markets moved, the most important of which was the decline in oil prices, indicated the acceleration of the economic slowdown.
Despite an agreement early last month between the Organization of Petroleum Exporting Countries (OPEC) and Russia to reduce oil production 1.2 million barrels per day starting this month; the price of West Texas crude has fallen by more than 40% compared to the highest levels last year and registered in early October the first.
This is because energy demand is expected to decline at a pace that exceeds the cut in output to be implemented by OPEC and its non-member allies.
The International Monetary Fund (IMF) has lowered its forecast for global economic growth for 2019 as the US and China economy may expand at a slower pace.
In the first week of the new year, economic data showed China's manufacturing PMI fell to 49.4 in December, its lowest level since early 2016 and below 50 points in a contractionary signal, .
Japan, one of the largest importers of oil in the world, suffered a decline in its gross domestic product (GDP) in the third quarter of this year amid expectations of continued economic weakness during 2019.
Recent figures on US homes, which are the backbone of the local economy, show weakness in start-ups, single-family homes and mortgage applications.
The rise in house prices since the recent financial crisis, together with the relatively small increase in wages and salaries, has reduced purchasing affordability.
The two reasons were so strong that they pushed homebuyers to defer purchases; the 30-year fixed-rate mortgage fell to 4.54% in late December from 4.82% in early November, according to Bank Rit.
However, the mortgage rate is still higher than the record level at the beginning of 2018 of 3.85%.
The recession was on the horizon when the Federal Reserve on Dec. 19 raised the federal funds rate for the fourth time this year.
While the rate hike was already priced into market expectations, Federal Reserve Chairman Jerome Powell's announcement at the post-meeting monetary policy conference that the central bank expects to raise interest rates two more times in 2019 was a shock.
Powell has exacerbated the situation by saying that the Federal Reserve's balance sheet assets, which are now being cut at a monthly rate of $ 50 billion, are moving automatically.
Bond markets indicated the possibility of a quick recession with the reversal of the curve of two US Treasuries yields last month as yields on 5-year bonds fell below 2-year and 3-year bonds.
The gap between 10-year US government bond yields and a two-year-old counterparty after the Fed's rate hike and Powell's comments also fell to less than 10 basis points.
Developments over the past month are key to investors' expectations for 2019.
US economic growth is likely to slow in the first half of this year, compared with the rapid pace it recorded in the second and third quarters of 2018, as the impact of corporate tax cuts faded.
While the US economy is unlikely to score two consecutive quarters of negative growth (deflation) for GDP by mid-2019, it may seem to investors as if the economy is in recession.
Instead, the National Bureau of Economic Research defines the economic recession as a significant decline in economic activity that spreads throughout the economy and lasts for more than a few months.
Powell did not satisfy investors at the December 19 press conference, but with signs of a weakening economy, the Fed will not be able to raise interest rates twice this year. Stop cutting its budget.
Given the recent recession, the difference between two-year and 10-year bond yields could be positive again by the end of 2019 as the Fed cuts interest rates.
For example, the difference between long and short-term yields reached 250 basis points in November 2008, when the economy was still in recession.
Predicting a long-term yield on long-term Treasury bonds is likely to provide a positive return during the recession.
Stocks may begin to be affected by the continued economic recession, even when the Treasury bond curve tends to be positive.
Developments over the past month are key to investors' expectations for 2019.
US economic growth is likely to slow in the first half of this year, as the pace of corporate tax cuts eased in the second and third quarters of 2018.
While the US economy is unlikely to score two consecutive quarters of negative growth (deflation) for GDP by mid-2019, it may seem to investors as if the economy is in recession.
Instead, the National Bureau of Economic Research defines the economic recession as a significant decline in economic activity that spreads throughout the economy and lasts for more than a few months.
Powell did not satisfy investors at the December 19 press conference, but with signs of a weak economy, the Fed will not be able to raise interest rates twice this year. Stop cutting its budget.
Given the recent recession, the difference between two-year and 10-year bond yields could be positive again by the end of 2019 as the Fed cuts interest rates.
For example, the difference between long and short-term yields reached 250 basis points in November 2008, when the economy was still in recession.
Predicting a long-term yield on long-term Treasury bonds is likely to provide a positive return during the recession.
Stocks may begin to be affected by the continued economic recession, even when the Treasury bond curve tends to be positive. 

Source: Mubasher

claud39
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