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Yield Curve Inversion Deepens, U.S. Markets Fall, Geopolitical Woe Hurts Sentiment

Thomas Hughes

The U.S. Futures Fall After The Yield Curve Inversion Deepens

The U.S. futures were indicating a slightly positive open in early Tuesday trading until the yield curve inversion deepened. The spread on the 10yr/2yr inversion deepened -6 bps after hitting a long-term low in Tuesday’s session. The inversion is a signal of impending economic recession and compounded by a steadily falling yield for the 30-yr bond. The Dow Jones is down about -0.35% at 8:30 AM and traders are on edge. The S&P 500 and NASDAQ Composite are both down about -0.25%.

On the flip-side, the chorus of Wall Street professionals who believe the yield-curve signal is a false one grows. Market watchers from Janet Yellen to Jim Cramer agree the signal may not be tied to the economy as it has been in past years. Today’s move may be driven by fears of tariffs that are scheduled to go into effect on Sunday.

In stock news, shares of Tiffany’s are up more than 3.0% after it reported better than expected EPS. The EPS beat comes despite a miss in revenue and worse than expected declines in comp-store sales. Oddly enough, the company says it saw weakness in the Americas and Europe and strength in Asia. Shares of watchmaker Movado fell -14% after it reported a miss on earnings and revenue that led to lowered full-year guidance.

EU Markets Fall On Growing Certainty There Will Be A Hard-Brexit

The EU markets are broadly lower at midday on Wednesday as the certainty of hard-Brexit grows. UK Prime Minister Boris Johnson set the opening date for parliament as October 14th, just two weeks before the Brexit date, leaving little time for members to debate and negotiate. In Italy the news is good, reports are the two main opposition parties are closer to forming a coalition and a new government.

In stock news, shares of Thomas Cooke fell -13% after the ailing tourism company announced it would receive a bailout. The bailout comes from China’s Fosun and dilutes shareholder value significantly. The DAX is posting the biggest loss among the indices with a decline of -1.26%. The CAC is close behind with a loss of -1.15% and the FTSE trails ar -0.40%.

Asia Mixed, Yield Curve In Focus

Asian markets are mixed on Wednesday as traders focus on a growing chance of global economic recession. The Korean Kospi led the market with a gain of 0.86% despite lingering fallout from the diplomatic dispute with Japan. The Australian ASX advanced 0.45% while the Nikkei rounds out the list of gainers at 0.11%.

This article was originally posted on FX Empire

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