GLOBAL MARKETS-Stocks, oil plunge on growing signs of global slowdown

* U.S. 2-year and 10-year Treasury yield gap inverts
* German GDP data, Chinese industrial output add to gloom
* U.S. stocks fall almost 3%; European shares down 1.6%
* Crude oil prices slip after previous day's big surge
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Herbert Lash
NEW YORK, Aug 14 (Reuters) - Equity markets tanked and oil
prices fell sharply on Wednesday after a closely watched bond
indicator pointed to the growing risk of a U.S. recession that
was heightened by data showing Germany's economy in contraction
and China's worsening.
Yields on two-year U.S. Treasury notes rose above the
10-year yield for the first time since 2007, a metric known as
an inversion that is widely seen as a classic recession signal.
A GDP report showing German output fell 0.1% in the second
quarter from the previous three months coupled with Chinese
industrial production rising at its weakest pace since 2002
added to investor fears of a global slowdown in growth.
U.S. stocks fell almost 3% and major equity indices in
Europe closed down 2% or near that while crude prices slumped
almost 5% at one point.
The yield on the benchmark 10-year U.S. Treasury note
US10YT=RR fell below 1.6% to its lowest since September 2016,
as investors sought safety from the equity market carnage.
"The combination of those three things (yield inversion,
Germany's GDP and Chinese industrial production) has refreshed
fears of a global slowdown," said Michael Arone, chief
investment strategist at State Street Global Advisors in Boston.
"We're seeing that flow through to stock prices falling and
yields across the globe plummeting as well," he said.
The slide in equity and oil markets erased the previous
session's sharp gains after the United States moved to delay
tariffs on some Chinese products.
China's offshore yuan CNH= gave up some early gains as the
weaker-than-expected data tempered optimism generated on Tuesday
by the U.S. decision to delay raising tariffs in September.
MSCI's gauge of global equity performance .MIWD00000PUS
fell 1.98% and its emerging market index .MSCIEF fell 0.59%.
The FTSEurofirst 300 index .FTEU3 of leading European shares
closed down 1.62%. The Bovespa index .BVSP fell more than 3% and the Mexican
bolsa .MXX slid 2%. Bay Street in Toronto .GSPTSE fell
1.75%. Negative interest rates from the European Central Bank and
Bank of Japan are creating an adverse effect on yields
everywhere, including the United States, Arone said.
"How much more can U.S. interest rates rise in the face of
all those low interest rates? In a lot of ways it's almost like
the medicine continues to make the patient more sick," he said.
The market rout is likely due, at least in part, to program
trading that was triggered by the yield inversion, said Randy
Frederick, vice president of trading and derivatives for Charles
Schwab in Austin, Texas.
"This level of sell-off is primarily driven by institutional
program trades," he said. "Moves of this magnitude are mostly
driven by programs that are tied to" the inverted yield curve.
On Wall Street, the interest-rate sensitive bank index
.SPXBK slipped 4.22% and the broader financial sector .SPSY
fell 3.36%. The dollar index .DXY added 0.17% and the euro EUR= fell
0.3% to $1.1138. The Japanese yen strengthened 0.77% versus the
greenback at 105.91 per dollar. U.S. West Texas Intermediate (WTI) crude futures CLc1
dropped $1.87 to settle at $55.23 a barrel, having gained 4% in
the previous session, the most in just over a month. London
Brent LCOc1 fell $1.82 to settle at $59.48 a barrel.
U.S. gold futures GCcv1 settled up 0.9% at $1,527.80.
"There is plenty of doom and gloom to spread across the
globe," said John Doyle, vice president for dealing and trading
at Tempus Inc in Washington. The U.S. yield curve "is a major
recession indicator. Germany, Italy and the UK are likely headed
for a recession. Today's Chinese data was shockingly bad."

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Yuan ticks lower https://tmsnrt.rs/2YNVA6s
Bonds https://tmsnrt.rs/2YN5XYj
China industrial output https://tmsnrt.rs/2YOpAiC
GRAPHIC-Global assets in 2019 http://tmsnrt.rs/2jvdmXl
GRAPHIC-World FX rates in 2019 http://tmsnrt.rs/2egbfVh
GRAPHIC-MSCI All Country World Index Market Cap http://tmsnrt.rs/2EmTD6j
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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