* 10-yr Treasury yields drop under 2-yr first time in 12
years
* Investors fear inversion heralds recession, hope for Fed
rescue
* Asia shares slip as Dow loses 800 points in worst day of
2019
* Oil extends big overnight drop on demand, supply pressures
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Tomo Uetake and Wayne Cole
TOKYO, Aug 15 (Reuters) - Asian stocks slid and oil prices
extended a punishing sell-off on Thursday as investors feared an
historic drop in long-term U.S. bond yields could prove a herald
of recession globally.
Spooked investors stampeded to the safety of sovereign debt
and drove yields on 30-year Treasuries US30YT=RR to all-time
lows at 1.97%. Yields have now fallen a staggering 60 basis
points in just 12 sessions to pay less than three-month debt.
Yields on 10-year paper US10YT=RR dropped to 1.55%, taking
them under two-year paper. Such an inversion was last seen in
2007 and correctly foretold the great recession that followed a
year later. US/
"The yield curves are all 'crying timber' that a recession
is almost a reality and investors are tripping over themselves
to get out of the way as economic recession hurts corporate
earnings and stocks can drop as much as 20%," said Chris Rupkey,
chief financial economist at MUFG Union Bank.
The only saving grace was that the sheer scale of the scare
would be bound to alarm central banks everywhere and likely draw
a policy response, especially from the Federal Reserve.
The futures market was clearly expecting drastic action as
it priced in a greater chance the Fed would have to cut rates by
half a point at its September meeting. FEDWATCH
"Hoping for the best on the policy front but positioning for
the worst on the economic backdrop seems to be the flavour of
the day," said Stephen Innes, a managing partner at Valour
Markets.
"The Fed, now out of necessity alone, will need to adjust
policy much more profoundly than they expected."
That hope helped E-Mini futures for the S&P 500 ESc1 and
the EUROSTOXX 50 STXEc1 nudge 0.2% higher in Asia.
Japan's Nikkei .N225 was still off 1.5% but up from early
lows, while Shanghai blue chips .CSI300 eased a relatively
modest 0.5%.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS dropped 0.8% and briefly touched a seven-month
low.
A SELF-FULFILLING CYCLE
All three of the major U.S. stock indexes tumbled about 3%
overnight, with the blue-chip Dow .DJI posting its biggest
one-day point drop since October. .N
Global growth woes have mounted as the Sino-U.S. trade war
claimed ever more victims, with the German economy contracting
in the June quarter and a truly dire set of activity data for
July out of China. President Donald Trump on Wednesday seemed to tie a U.S.
trade deal with China to a humane resolution of the weeks of
protests wracking Hong Kong. A top Australian central banker on Thursday warned a world
downturn could become "self-fulfilling" if the uncertainty over
trade led businesses to put off investment indefinitely.
The threat to global demand took a heavy toll on oil prices,
with Brent crude LCOc1 losing another 44 cents to $59.04 a
barrel, after shedding 3% overnight. U.S. crude CLc1 was last
down 33 cents at $54.90. O/R
Safe-haven gold gained 0.3% to $1,521.00 per ounce XAU= ,
not far from its highest since April 2013.
Major currencies were relatively calm, with the yen gaining
just a little from its status as a safe harbour. The dollar was
last at 105.85 yen JPY= having fallen 0.8% overnight form a
top of 106.77.
The dollar index .DXY was a shade easier at 97.932, with
the euro bearing its own burdens at $0.1.1147 EUR= following
Wednesday's soft German data.
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U.S. yield curve inversion Aug. 14 2019 Image https://tmsnrt.rs/2YQ1VhR
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