US stocks are set to rally after historic Treasuries meltdown that sent equities plunging

trader

  • US stocks are set to rally after equities crashed on
    Wednesday over recession fears. 
  • The Dow fell 800 points on Wednesday, with the S&P
    500 and Nasdaq both falling roughly 3%. 
  • Asian stocks closed mixed while European equities
    bounced back from yesterday’s rout.
  • View
    Markets Insider homepage for more stories. 

US stocks are set to rally on Thursday morning, after equities
suffered their worst night of the year, with the Dow Jones losing
800 points in single afternoon’s trading. 

Stocks dropped on fears of a recession, as the spread between 2
and 10 year treasury yields fell below zero —
a sign that recession could be on the horizon.

The yield on US 30-year bonds also fell to a new low, below 2%
for the first time ever, once again signalling a shrinking
economy.

“While investors may still make an annual return of 1.98% for
holding 30-year bonds until maturity, when taking inflation into
consideration they may end up with negative real returns,”
according to Hussein Sayed, Chief Market Strategist at FXTM.
“That’s a terrible situation for pension funds and some insurance
companies who are obliged to have exposure to long duration
bonds.”

Meanwhile, the global economic slowdown continued on Wednesday
with both Germany and China reporting poor results.
Germany’s economy contracted in the three months to June
, while
industrial production in China fell. 

“US futures are positive as dip buyers test the water – but
this could be dragged lower through the European session, said Neil
Wilson, Chief Market Analyst at Markets.com. “We need to see how
Europe pans out. I would not be banking on a recovery and at send,
European shares were up a tad but looking precarious as they
flirted with the flatline,”

“The tariff delay rally was a dead cat bounce. Investors are
filtering out this kind of noise to focus on real economic data,”
Wilson added. “This shows that outside the US, where growth remains
ok, the rest of the world is not doing well. We should always
caution that while yield curve inversion was a definite sell
signal, stocks can have a pump after these events.”

Here’s how markets look at 9.15 a.m in London (4:15 a.m.
ET):

  • US futures are rallying, with the S&P 500 up 0.6%
    and the Nasdaq up 0.5%. 
  • European markets opened marginally higher, with the
    German Dax up 0.6% and Euro Stoxx 50 up 0.6%.
  • Asian markets closed mixed, with the Nikkei 225 falling
    1.2%, while the Shanghai Composite and the Hang Seng both rose,
    0.3% and 0.8% respectively. 
  • Markets in Italy, Austria and Greece are shut for
    public holidays.
  • Oil markets continued to be battered by trade war
    uncertainty with WTI down 0.3% and Brent Crude down
    0.6%.

SEE ALSO: The
US gets its biggest recession warning yet as the most closely
watched part of the yield curve inverts


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Source: FS – All – Economy – News
US stocks are set to rally after historic Treasuries meltdown that sent equities plunging