* MSCI world equity index falls 0.1%
* European stocks down 0.2%
* Sterling down, UK stocks up on BBC parliament suspension
report
* Gold, silver in demand; Japanese yen stands tall
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tom Wilson
LONDON, Aug 28 (Reuters) - World stocks nudged down on
Wednesday as deepening inversion of the U.S. bond yield curve a
day earlier threw up reminders of looming recession risks,
sending investors towards safe havens such as the Japanese yen
and precious metals.
The U.S. yield curve inverted further on Tuesday to levels
not seen since 2007, rekindling fears of a looming recession and
fuelling a sell-off on Wall Street. An inversion of the yield
curve has historically been a highly accurate predictor of a
U.S. recession.
MSCI's world equity index .MIWD00000PUS , which tracks
shares in 47 countries, fell 0.1%, dragged down by European
shares. The broad Euro STOXX 600 .STOXX fell 0.3%, with
bourses in Paris .FCHI and Frankfurt .GDAXI fell 0.3% and
0.4% respectively.
Still, Wall Street futures gauges NQcv1 EScv1 suggested
U.S. stocks would show more resilience, forecasting gains of
around 0.3%.
London's bourse .FTSE bucked the trend, turning positive
after sterling fell on a tweet by a BBC journalist that
Britain's Queen Elizabeth could be asked as early as Wednesday
to agree to suspend parliament. It was last up 0.2%.
"It's become very difficult for investors to garner an idea
of where we go to next," said Michael Hewson, chief market
strategist at CMC Markets. "The weakness in bond yields, and the
strength in havens speaks to an investor that is becoming
increasingly risk averse."
The 10-year Treasury yield US10YT=RR fell to around 6
basis points below the two-year yield US2YT=RR , with the
10-year yield at 1.494%, close to a three-year low touched on
Monday.
Longer-dated bond yields also fell. U.S. 30-year Treasury
yields US30YT=RR slumped to a few record low, touching 1.906%.
and were last down 6 basis points on the day.
Some investors said market fears of a looming recession,
would further support expectations that the U.S. Federal Reserve
would cut interest rates further - something they warned is not
a foregone conclusion.
Federal funds futures FEDWATCH implied traders saw a 91%
chance of a 25 basis point rate cut by the U.S. central bank
next month, and a 100 basis point cut within 2020.
"The market is pricing another 100 basis points cut from the
Fed by next year, but the Fed seems rather reticent to follow
where the market is indicating it should go," said Peter
Schaffrik, head of European rates strategy at RBC Capital
Markets.
SAFE HAVENS IN DEMAND
The renewed fears of a global economic slowdown bolstered
demand for assets perceived as safe havens.
Gold XAU= recovered some of its early losses to last
trading at $1,539.98, down 0.1%. Silver XAG= gained 0.8%, on
course for its fourth straight day of gains.
In currencies, the Japanese yen kept a grip on its recent
gains. The yen, seen as a safe haven in part because of Japan's
large trade surplus and a tendency for domestic investors to
repatriate money in times of market turbulence, traded at 105.77
per dollar JPY=EBS . It held its gains from the previous day,
when it advanced 0.35% to a 7-month peak.
The dollar index, which measures the greenback against a
basket of currencies, rose a sliver of a gain to 98.042 .DXY .
Currencies that tend to perform well when investors buy into
riskier assets, such as the Australian AUD=D3 and New Zealand
NZD=D3 dollars, fell.
The pound, already trading lower on the day, extended its
drop after senior BBC journalist Nick Robinson said on Twitter
that Britain's queen could be asked to suspend parliament. It
fell to hit $1.2220, down 0.5% GBP=D3 . British Prime Minister Boris Johnson has said Britain will
leave the European Union on Oct. 31 with or without a deal.
Media have previously reported that he wants to suspend
parliament to help force through an exit.
For Reuters Live Markets blog on European and UK stock
markets, please click on: LIVE/
U.S. Yield Curve http://tmsnrt.rs/2zUqXiW
World FX rates in 2019 http://tmsnrt.rs/2egbfVh
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>