According to the news report by Reuters, global stocks reached a 12-day low during trading on Monday morning thanks to concerns about economic growth. This sent investors rushing towards safe-haven assets. However, later in the day, markets stabilized after better-than-expected data emerged from Germany.
On Friday, German manufacturing data had been dismal, which led to a global sell-off that led to markets tumbling and benchmark bond yields dropped below zero. However, on Monday, the March business climate index from the Ifo Institute went up unexpectedly, thanks to which global markets recovered somewhat.
The biggest cause for concern on Friday was the inversion of the American bond yield curve, which had created fears that the world’s biggest economy was heading for a recession. However, the release of the Ifo report helped reverse some of the losses in the global markets.
Early losses in Monday’s trading were trimmed, with Paris trading flat, the FTSE in London reduced losses to 0.2% and the German stock market gained 0.14%. The banking and industrial goods & services segment in Europe, which had dropped by 1%, reversed losses to trade flat in later trading.
However, these reversals are not yet stable. The chief economist of Geneva’s CA Indosuez, Marie Owen Thomsen stated that the markets had a bad end to 2018, which later showed recovery. However, the confusion about how Brexit was going to play out has clouded market recovery.
Thomsen stated that many people could have already realized a large part of their annual expected returns, which meant that many investors would want to play safe at this point in time.
The Asian markets however, which were the first to open trading on Monday, saw massive tumbles. The Japanese Nikkei dropped to a 5-week low, falling 3.1%. This was the biggest 1-day drop for the index since December 2018.
The South Korean index Kospi fell 1.7%, and Chinese stocks on the CSI 300 Index fell by 1.4%. the MSCI’s global stocks gauge also fell by 0.5%. This negative sentiment was expected to affect the US stock markets when they opened. Indications were already there with the S&P futures falling by 0.2%.
The data from Germany, however, helped the country’s benchmark 10-year bond yield to move out of negative territory. Additionally, the 3-month and 10-year Treasury yields in the United States also turned towards the green. The 10-year yields went up to 2.7240, after they had dropped into an inverted curve for the first time since 2007.
JP Morgan’s analysts, in a note to clients, stated that the bond market’s price movement was a huge red flag to those who were optimistic about stocks. They stated that economic growth as well as bonds yields or curves should be the only indicators that stocks needed to focus on moving forward.
The analysts stated that until these markers stabilized, it was very hard to see any kind of rally in the stock markets.
Politics once again impacted the stock markets, with situations in the US and the UK being in focus. Robert Mueller, the US Special Counsel, after a long investigation, stated that no one associated with Donald Trump’s election campaign had conspired with Russia in 2016.
However, the political turbulence in the UK over Brexit continued to drag on the stock market. British Prime Minister Theresa May conducted crisis negotiations with senior colleagues and pro-Brexiteers on Sunday, hoping to revive her twice-defeated separation deal with the European Union after reports had come that her cabinet was trying out her.
In commodities, the price of US crude oil dropped by $0.13 to trade at $58.91 a barrel. The international benchmark Brent crude also dropped by $0.22 to trade at $66.81 per barrel.