Retail Sales Outpace Estimates, Stabilizing Markets and Slightly Easing Concerns of Recession

A barge built with four levels of shipping containers is seen at Pier 1 at Treasure Island in San Francisco California in this file

30-year Treasury slumps to historic low as recession fears spike

The curve, widely seen as a harbinger of a looming economic recession, emerged between the two-year and 10-year USA treasury bills at some point, marking the first time since June 2007. -Chinese tariff war over trade and technology.

Yields on 10-year U.S. Treasury notes fell below the two-year yield, intra-day, for the first time since 2007, in what is known as a yield curve inversion and widely seen by investors as a sign that a recession is coming.

The US yield curve has inverted before every recession in the past 50 years.

The likelihood of the U.S. falling into recession next year is "growing", with bond markets pricing in a 38 per cent chance, Fidelity International's cross asset investment specialist Anthony Doyle said.

The Hang Seng Index in Hong Kong and China's Shanghai Composite Index also dropped at market open. The Russell 2000 index of smaller company stocks slid 43.05 points, or 2.8 percent, to 1,467.52.

Traders tend to shift money to the safety of US government bonds when they're fearful of an economic slowdown. When that flips - meaning the yield on the 10-year Treasury note falls below the two-year Treasury note - the "inverted yield curve" occurs.

Gold prices, which have surged nearly 20% since late May on uncertainty driven by the U.S. -Sino trade spat and global growth concerns, edged higher amid concerns about a slowdown after China threatened to retaliate against the latest U.S. tariffs.

Wednesday was the first time that yields for 2-year and 10-year Treasuries had inverted since June 2007, months before the onset of the great recession, which crippled markets for years, Reuters noted.

The S&P 500 closed down 2.93% at 2,840.60, while the Dow Jones Industrial average closed lower by 3% at 25,479.42.

The financial sector was also among the worst performers, pulling back around 3.4 percent, as major bank shares, sensitive to interest rates, extended losses. "We're outside of the earnings season and markets are being batted around by news". In China, the world's second-largest economy, growth in factory output, retail spending and investment weakened in July.

The president has long said it's time for the United States stand up to China.

Macy's plunged 13.2 percent, the sharpest loss in the S&P 500, after it slashed its profit forecast for the year. Drops like this are typical for stocks, and they're the price investors have had to pay for better long-term returns than bonds historically.

A US House of Representatives oversight panel called on Mylan NV and Teva Pharmaceutical Industries Ltd to turn over documents as part of a review into generic drug price increases.

"We have seen stocks trading very poorly as a result of the yield curve inversion, so that will be flashing some additional warning lights for the Fed that they have to do more", said Andrea Iannelli, investment director at Fidelity International. It suggests bond investors expect growth to slow so much that the Federal Reserve feels compelled to cut short-term interest rates to support the economy.

China's threat to impose counter-measures in retaliation for the latest US tariffs knocked stocks sprawling on Thursday, checking earlier attempt to recover from a rout sparked by fears of a world recession.

Global benchmark Brent crude LCOc1 fell $1.25 to settle at $58.23 a barrel. The Japanese yen was steady versus the greenback at 105.93 per dollar, having firmed 0.8% on Wednesday. The euro edged up to $1.1142 from $1.1138.

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