“A key part of the U.S. yield curve, a closely-followed recession indicator, inverted further on Wednesday while 30-year Treasury yields fell to a few record low on growing concern about the fallout from a bitter global trade conflict.
“The premium on two-year Treasury yields over 10-year yields US2US10=TWEB was at 6.2 basis points, a level not seen since 2007, according to Tradeweb data.”
“Perhaps nobody was more surprised to hear that China had called President Donald Trump’s administration to restart trade talks than the government in Beijing itself. …
“It all made for splashy headlines and momentarily boosted stocks, but nobody in Beijing officialdom appeared to know what he was talking about.”
“China’s total debt ratio continued to grow in the second quarter of 2019 as the government continued to emphasise support for the economy over efforts to reduce excess debt and risky lending.
“Even as China’s debt-to-gross domestic product (GDP) ratio surged in the first six months of the year to nearly 250 per cent, there are growing calls among academics and Beijing policy advisers for the country to further loosen its purse strings further to counter the headwinds from the trade war with the United States.”
“South Korea’s business sentiment stayed the worst since the 2008-2009 financial crisis in September as the Korean Inc. faced trade challenges on top of waning productivity…
“The index has been under 100 for the 16th straight month.”
“Weakness in India’s investment and consumption activity worsened in July, with economic growth showing little signs of recovery from a five-year low.
“A gauge measuring overall activity moved one notch toward weaker territory, as six of the eight high-frequency indicators compiled by Bloomberg fell from the previous month. Car sales slumped the most in almost two decades and latest data showed infrastructure sector output grew at the slowest pace in more than four years.”
“Boris Johnson is heading into the crunch period for Brexit negotiations with the UK economy potentially on the brink of recession and as global economic growth falters…
“The prime minister faces the challenge of breaking the deadlock with Brussels to avoid a no-deal Brexit on Halloween, just as the outlook for the economy deteriorates at home and abroad.”
“A collapse in German exports has left Europe’s largest economy close to recession.
“As storm clouds gather over the global economy, sales of German goods overseas fell 1.3 per cent in the second quarter of the year. It was the biggest decline in more than six years.”
“So much time has passed since the Great Recession of 2007-2009 that many adults haven’t experienced an economy that’s contracting rather than growing in their working lives.
“But slowing global growth and the U.S.-China trade war, among other strains, have flamed fears that the next recession is around the corner. Is a recession inevitable?Eventually, yes…”
“…the regulators’ efforts to rescue the financial system were incredibly broad.
“By March 2009, the Fed had deployed $US7.77 trillion, more than half of US GDP, to lend to financial institutions on the brink, buy assets plummeting in value, or otherwise forestall disaster…”
“In 2008 to 2009, the Fed cut rates by five percentage points and it was not enough. Today, there’s far less room to respond to a recession. And elsewhere Japan and the European Union are headed toward a recession with their central bank rates already below zero.
“So, what happens then?”
“…The industry argues that higher capital requirements for trading in general — more than three times pre-2008 levels — will prevent a repeat of the financial crisis…
“Consumer groups and some regulators see the Volcker rule change quite differently. The new version cuts the pool of financial instruments covered by the rule by at least one-quarter, according to a regulator who voted against the change. It not only frees banks up to take more short-term bets but also reduces the documentation requirements, opening the door to more risky trading.
“Critics also point out that if banks find ways to trade on their own account, rather than for clients, it could reawaken the poisonous conflicts of interest that flourished ahead of the 2008 crisis.”