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Dow falls 200 points on a scary sign from the bond market

Rabobank economists are projecting a superficial global recession because the trade war is hurting financial markets, consumer confidence and the global economy. Rabobank reduced its global growth projections below 3% on Wednesday.

The yield on US government bonds. UU. At 10 years it fell close to a minimum of three years of 1.6651%. Bonds and returns move in opposite directions.

Gold was also a big winner on Wednesday. Gold futures crossed the threshold of $ 1,500 per ounce for the first time since 2013. Gold rose 2.1% and rose almost 18% this year.

the Dow (INDU) fell to 589 points before reducing its losses. The index traded 200 points, or 0.8%, lower around noon. the S&P 500 (SPX) fell 0.6%, and the Nasdaq compound (COMP) fell 0.4%.
Monday was the worst day of the year for the shares, but the three share benchmarks broke a losing streak of several days on Tuesday.

Problems in the bond market

The rate cuts of global central banks are also helping to boost bond purchases. During the night, both the Reserve Bank of New Zealand and the Reserve Bank of India achieved more pronounced rate cuts than expected.

The Federal Reserve of the United States reduced rates last month for the first time in a decade. That helped precipitate the decline in long-term bond yields, although the returns had been going down for some time.

"While we can be sure that global central banks will step forward to alleviate the impact of the trade war, which probably implies even lower interest rates in all areas, the final impact is likely to be negative both for growth as for inflation, "said Rabobank economists.

That is a worrying signal: the yield curve, which traces interest rates through debt maturities, is currently reversed. Short-term debt is paying higher rates than long-term bonds, as investors remain fearful of a recession in the United States. An inversion of the yield curve has preceded each recession.

Yields could continue to fall if President Donald Trump gets his way. Trump lashed out at the Federal Reserve on Twitter, saying that the central bank was "too proud to admit its mistake of acting too fast and tightening too much." Trump called for "bigger and faster" rate cuts and said the performance curve "is too wide."

The performance curve, however, has flattened in recent years, and has even invested more since 2007.

Other Federal Reserve rate cuts could even boost the price of gold to more than $ 1,650, said Edward Moya, senior market badyst at Oanda, in a note.

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