Brace for difficult economic times (2nd UPDATE)
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Brace for difficult economic times
PORT MORESBY: The sluggish global economy just got jolted today (Monday March 25, 2019) with worldwide jitters that the US is going into a recession.
Plunging global yields and economic data showing slowing growth in the US manufacturing and services sectors sent 10-year treasury yields below their three-month rate for the first time since 2007, signalling a possible recession.
This is going to hurt economies worlwide and Papua New Guineans should also be prepared for the worse.
Here are some early details reported by The Star today:
KLCI tumbles amid global equity selloff, oil prices retreat
MARKETS
Monday, 25 Mar 2019
9:23 AM MYT
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Economic data showing slowing growth in the US manufacturing and services sectors sent 10-year treasury yields below their three-month rate for the first time since 2007, signalling a possible recession.
Last Friday, major Wall Street indices recorded their biggest one-day percentage losses since Jan 3 with the Dow Jones sliding 1.8%, the S&P500 falling 1.9% and the Nasdaq sliding 2.5%.
At 9.10am, the FBM KLCI fell 16.53 points to 1,650.13. Trading volume was 216.33 million shares valued at RM96.91mil. There were 340 decliners versus 48 gainers and 157 counters unchanged.
Leading the sharp fall on the KLCI was Petronas Gas dropping 26 sen to RM17.60, Hong Leong Bank shaving 16 sen to RM20.24 and Maxis sliding 16 sen to RM5.40.
Most active counters were Sapura Energy sliding 0.5 sen to 34 sen, PUB trading unchanged at 9.5 sen and MyEG slipping three sen to RM1.36.
Among early opening markets, Japan's Nikkei plunged 2.9%, Australia's ASX200 dropped 1.2% and South Korea's Kospi fell 1.6%.
Leading the decline in Southeast Asia, Singapore's Straits Times Index dropped 1.5%.
Oil markets were also rocked by fears of a recession. US crude fell 65 cents to US$58.39 a barrel and Brent crude shed 61 cents to US$66.42 a barrel.
Investors flocked to safe haven currencies, pushing the ringgit 0.2% lower agains the greenback at 4.0730. The local currency fell 0.9% against the pound sterling at 5.3714 and 0.1% against the Singapore dollar at 3.0106.
Stocks tumble, bonds rally as US recession risk flashes 'amber'
MARKETS
Monday, 25 Mar 2019
9:01 AM MYT
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| U.S. stocks futures turned negative in early Asian trading with E-minis for the S&P 500 skidding 0.5 percent. MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.6 percent to a one-week low. Japan's Nikkei tumbled 2.9 percent, South Korea's Kospi index declined 1.5 percent while Australian shares faltered 1.3 percent. |
U.S. stocks futures turned negative in early Asian trading with E-minis for the S&P 500 skidding 0.5 percent. MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.6 percent to a one-week low. Japan's Nikkei tumbled 2.9 percent, South Korea's Kospi index declined 1.5 percent while Australian shares faltered 1.3 percent.
On Friday, all three major U.S. stock indexes registered their biggest one-day percentage losses since Jan.3 with the Dow sliding 1.8 percent, the S&P 500 off 1.9 percent and the Nasdaq dropping 2.5 percent.
Concerns about the health of the world economy heightened last week after cautious remarks by the U.S. Federal Reserve sent 10-year treasury yields to the lowest since early 2018.
Adding to the fears of a more widespread global downturn, manufacturing output data from Germany showed a contraction for the third straight month. And in the United States, preliminary measures of manufacturing and services activity for March showed both sectors grew at a slower pace than in February, according to data from IHS Markit.
In response, 10-year treasury yields slipped below the three-month rate for the first time since 2007. Historically, an inverted yield curve - where long-term rates fall below short-term - has signalled an upcoming recession.
"We have re-run our preferred yield curve recession models, which now suggest a 30-35 percent chance of a U.S. recession occurring over the next 10 18 months," said Tapas Strickland, markets strategist at National Australia Bank.
Typically a 40-60 percent probability sees a recession within the next 10-18 months, Strickland added, basing the analysis on previous recessions.
"The risk of a U.S. recession has risen and is flashing amber and this will keep markets pricing a high chance of the Fed cutting rates."
As bonds rallied on Monday, yields on 10-year Japanese government bonds slumped to minus 8 basis points, the weakest since September 2016. Australian 10-year year yields plunged to a record low of 1.756.
POLITICAL HEADWINDS
Much of the concerns around global growth is stemming from Europe and China which are battling separate tariff wars with the United States.
Politics was also in focus in the United States and Britain.
A nearly two-year U.S. investigation found no evidence of collusion between Donald Trump's election team and Russia, in a major political victory for the U.S. President.
The long-awaited Mueller report into whether Trump's campaign colluded with Russia to help Trump defeat his Democratic opponent, Hillary Clinton, marked a major milestone of his presidency as he prepares for his 2020 re-election battle.
Political turmoil in Britain over the country's exit from the European Union also remains a drag on risk assets.
On Sunday, Rupert Murdoch's Sun newspaper said in a front page editorial British Prime Minister Theresa May must announce on Monday she will stand down as soon as her Brexit deal is approved.
The British pound was a shade lower at $1.3189 after three straight days of wild gyrations. The currency slipped 0.7 percent last week.
In currency markets, the Japanese yen - a perceived safe haven - held near its highest since Feb. 11. It was last flat at 109.95 per dollar.
The Australian dollar, a liquid proxy for risk play, was down for its third straight session of losses at $0.7073.
In commodities, U.S. crude fell 33 cents to $58.71 per barrel. Brent crude futures eased 24 cents to $66.79. - Reuters/The Star
Oil prices slide on concerns of sharp economic slowdown
OIL & GAS
Monday, 25 Mar 2019
8:56 AM MYT
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| Brent crude oil futures were at $66.79 per barrel at 0022 GMT, down 29 cents, or 0.4 percent, from their last close. U.S. West Texas Intermediate (WTI) futures were at $58.68 per barrel, down 37 cents, or 0.6 percent, from their last settlement. |
Brent crude oil futures were at $66.79 per barrel at 0022 GMT, down 29 cents, or 0.4 percent, from their last close.
U.S. West Texas Intermediate (WTI) futures were at $58.68 per barrel, down 37 cents, or 0.6 percent, from their last settlement.
"Inflation expectations have risen," said U.S. bank Morgan Stanley.
"Estimates for growth and earnings have been revised down materially across all major regions."
ANZ bank said the darkening economic outlook "overshadowed the supply-side issues" the oil market was facing amid supply cuts led by producer club OPEC as well as the U.S. sanctions on Venezuela and Iran.
The Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies such as Russia, together referred to as 'OPEC+', have pledged to withhold around 1.2 million barrels per day (bpd) of oil supply this year to prop up markets, with OPEC's de-facto leader seen to be pushing for a crude prices of over $70 per barrel. - Reuters/The Star
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