ASX plummets after Wall Street suffered its worst one-day fall this year sparking market panic and recession fears
- The Australian share market has fallen by two per cent in early trade on Thursday
- It followed a plummet on Wall Street with Dow Jones index down three per cent
- Global investors are particularly worried about the U.S. falling into a recession
- Yields on 10-year US Treasury bonds briefly fell below those of two-year bonds
- This occurred ahead of 1990, 1981, 1990, 2001 and 2009 American recessions
The Australian share market has plummeted after Wall Street suffered its worst one-day fall this year as investors worried about an American recession.
The benchmark S&P/ASX200 plunged by two per cent in early trade on Thursday, with bank shares doing particularly badly.
It occurred after Wall Street dived, with the Dow Jones Industrial Average falling by more than three per cent, its worst one-day fall this year.
The U.S.-China trade war has now spooked financial markets into fearing a global recession, which would affect Australia.
The Australian share market has plummeted after Wall Street suffered its worst one-day fall this year as investors worried about an American recession
Investors panicked after yields on 10-year US Treasury bonds briefly fell below those of equivalent two-year government bonds on Wednesday night, Australian time.
This phenomenon, known as an inverted yield curve, occurred ahead of the 1980, 1981, 1990, 2001 and 2009 recessions in the United States.
ANZ head of economics David Plank said this bond yield curve was a ‘useful predictor’ of the US economy falling into a recession.
‘Of course, it doesn’t tell you about the timing,’ he told Daily Mail Australia on Thursday morning.
‘If the US has a recession in the next five years, people will look back at the inversion and say, “Aha, the yield curve told us”.’
Mr Plank said US President Donald Trump’s trade dispute with China was a major worry for financial markets.
The benchmark S&P/ASX200 plunged by two per cent in early trade on Thursday. It occurred after Wall Street dived, with the Dow Jones Industrial Average falling by more than three per cent, its worst one-day fall this year
‘Given the trade dispute, the odds of a global recession have risen materially in the last month or two,’ he said.
In another sign of panic, yields on 10-year Australian Commonwealth Government Securities plunged to a new record low of 0.9 per cent on Thursday morning.
Put another way, these government bond yields have fallen by a third in just a fortnight.
Such is the popularity of government bonds that investors are happy to be paid interest that is less than the Reserve Bank of Australia’s one per cent cash rate.