March 28, 2019: Asian markets were gripped by volatility Thursday as investors grow increasingly worried about the state of the global economy, sending them rushing to safe-haven assets and fuelling talk of possible recession.
The pound was managing to hold its own despite another night of drama in Westminster that saw Prime Minister Theresa May offer to resign if MPs backed her Brexit plan and lawmakers reject a series of alternative options on leaving the EU.
After a stellar start to the year, equities are beginning to stumble with closely watched sovereign bond yields — key indicators of the state of the economy — flashing a warning.
The yields on government bonds– considered the most watertight investment in times of turmoil and uncertainty — have tumbled around the world while central banks are becoming more dovish on their outlooks.
This is most notable in the US, where the Federal Reserve has lowered its rate hike expectations and 10-year Treasury bond yields are below those of three-month notes. The last time this happened was before the 2008 global financial crisis.
“We are worried about the short term because the Fed is as dovish as they can be in the short term,” Chris Harvey of at Wells Fargo told Bloomberg TV.
“Interest rates are coming down throughout the globe, fears of recession are starting to go higher. We don't think those fears are founded — but you have to acknowledge that that's going to weigh on markets in the short term.”
After a negative lead from Wall Street, Asia markets fluctuated.
Tokyo ended the morning 1.5 percent lower as exporters were hit by a jump in the safe-haven yen, while Hong Kong slipped 0.1 percent and Shanghai fell 0.2 percent.
Seoul dropped 0.7 percent and Taipei shed 0.2 percent but Sydney rose 0.2 percent and Singapore was flat as they recovered from early losses. Manila and Jakarta were also up.