Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Anxiety over a global economy slowdown is building today, with warning lights flashing in the bond market – and a potential currency crisis bubbling away in Turkey again.
Investors continue to pile into safe-haven government bonds, driving up prices and sending yields (interest rates) steadily lower. That’s a classic sign that the markets expect low growth, or even a dreaded recession.
Overnight, the yield on US 10-year Treasuries has fallen to a 15-month low, following signals from several central bankers that the global outlook has weakened.
This means the US yield curve (a graph of the prices of bonds of various maturities) continues to invert. That’s a worrying sign — indicating that investors are losing faith that growth will continue in the long term.
Other G7 government bond yields are also sinking, signalling that growth concerns are broad-based.
As Jasper Lawler of London Capital Group puts it:
Wall Street closed in the red and Asian markets traded broadly lower as developed-market bond yields continued to fall overnight. US 10-year treasury yields hit a fresh 15 month low, whilst Australian bond yields spiralled to a record low and Japanese bond yields are at levels not seen since 2016.
The rapid and persistent decline in bond yields is unnerving investors about the economic outlook.
Turkey is also creating some angst, with a crackdown on foreign banks borrowing lira causing financial ructions yesterday. Ankara says it is determined to prevent speculation weakening the lira – but economists fear the currency squeeze will hurt its economy.
Stocks fell sharply in Istanbul yesterday, as investors sold assets to get their hands on lira to settle trades, after the rate to borrow the currency overnight soared over 1,00%.
Also coming up today
New eurozone confidence data, and updated US growth figures, may shed new light on the state of the global economy.
UK business leaders and politicians will be gathered at the British Chambers of Commerce annual conference – expect Brexit to feature very heavily.
City traders will be casting a nervous, weary eye towards Westminster, for signs of a Brexit breakthrough. The pound held pretty steady yesterday, despite MPs rejecting eight different ways out of the mess.
- 10am GMT: Eurozone economic confidence report
- 12.30pm GMT: US GDP for Q4 2018 (third estimate)