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By David Randall
NEW YORK, Aug 7 (Reuters) - A rush into the safety of U.S.
government bonds smothered a broad rally in global stocks
Wednesday as spiraling fears of a global economic recession
gripped markets.
Yields on the benchmark 10-year Treasury fell to their
lowest levels since October, 2016, and gold soared to a six-year
high, while riskier assets like stocks and oil prices nosedived.
On Wall Street, the Dow Jones Industrial Average .DJI
opened more than 500 points lower, helping erase earlier gains
in European shares.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.57%.
"Bonds are being bought in a panic mode," said Andrew
Brenner, managing director at National Alliance Capital Markets.
The Dow Jones Industrial Average .DJI fell 365.11 points,
or 1.4%, to 25,664.41, the S&P 500 .SPX lost 31.36 points, or
1.09%, to 2,850.41 and the Nasdaq Composite .IXIC dropped
62.56 points, or 0.8%, to 7,770.71. .N
The pan-European STOXX 600 index .STOXX lost 0.39%. .EU
U.S. shares had gained overnight after President Donald
Trump downplayed worries of a lengthy trade war and senior
adviser Larry Kudlow said Trump's administration is planning to
host a Chinese delegation for talks in September Street futures gauges also rose.
The U.S. administration's remarks marked a shift in tone
from recent days, when Beijing warned that Washington's labeling
China as a currency manipulator would have severe consequences
for the global financial order. The U.S. move rattled financial
markets and dimmed hopes the trade war was ending.
Since then, China's state banks have been active in the
onshore yuan forwards market, tightening dollar supply and
supporting the Chinese currency, sources told
Reuters. Despite that support, the yuan still dropped 0.2% to 7.0708
in offshore markets CNH=EBS , with currency markets still on
edge after the People's Bank of China (PBOC) set its official
reference rate at an 11-year low.
"We had a little bit of recovery yesterday, but this morning
we are seeing that stalling due to the PBOC fixing the
dollar-yen higher again," said Thu Lan Nguyen, FX strategist at
Commerzbank.
The skittish mood was underlined by continuing demand for
currencies and commodities considered safe havens.
Gold touched a six-year high of $1,489.76 per ounce XAU= .
The Japanese yen rose 0.2% to 106.26 JPY=EBS , although that
was still some way from levels seen on Monday when the trade
war's escalation panicked investors. Central banks across the world, looking to rev up growth and
fight low inflation rates, have turned increasingly dovish in
recent months.
Ten-year Treasury notes yielded 1.66% percent US10YT=RR ,
their lowest since 2016, as investors bet on another rate cut by
the Federal Reserve in September. Germany's 10-year bond yield fell to record lows deep in
negative territory as the bigger-than-expected Kiwi interest
rate cut and weak German economic data fueled further a rally in
bond markets. German industrial output fell more than expected in June,
adding to signs that Europe's biggest economy contracted in the
second quarter as its exporters were caught up in trade
disputes. In commodity markets, oil prices slipped to near seven-month
lows, with the potential for damage to the global economy and to
dampen demand from the Sino-U.S. trade dispute casting a shadow
over the market. International benchmark Brent crude futures LCOc1 fell
3.2% to $57.03 a barrel, while U.S. crude dropped 3.7% to
$51.65.
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Global assets in 2019 http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Global bonds dashboard (DO NOT USE UNTIL UPDATE FOUND) http://tmsnrt.rs/2fPTds0
Emerging markets in 2019 http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
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