Earlier this week, a rare shift in in U.S. Treasury note interest rates ignited fears of an oncoming recession and brought the Dow Jones tumbling 800 points, but indicators in California have been giving economists the jitters since as far back as May.
Yields on 2-year and 10-year Treasury notes inverted early Wednesday, a market phenomenon that shows investors want more in return for short-term government bonds than they are for long-term bonds. Clearly, the economy is not on the rise as President Donald Trump has stated.
China's threat to impose counter-measures in retaliation for the latest USA tariffs knocked stocks sprawling on Thursday, checking earlier attempt to recover from a rout sparked by fears of a world recession.
"The uncertainty as to how the dispute will play out on both the trade and technology fronts means businesses are waiting to see how the uncertainty resolves rather than invest", he said, according to the text of his keynote speech to be delivered at a conference in Sydney on Thursday.
That comes from trade tensions between the USA and China, mixed with some political risks. Hong Kong was a bright spot, rising 0.8 percent while Shanghai edged up 0.3 percent. Markets in Taiwan, New Zealand and Southeast Asia also retreated. South Korea and India were also up.
On Wall Street, futures for the Standard & Poor's 500 Index and the Dow were up 0.5%. In its latest projection, the US investment bank lowered its fourth-quarter growth forecast by 0.2 percentage points to 1.8 percent. The Nasdaq lost 242 points, or 3%, 7,773.
Neil Wilson, Chief Market Analyst for Markets.com commented: "The 3mo10yr curve has been inverted for some time already but the fact that 2s10s has also gone this way is a massive red warning light for the United States economy".
China's official gross domestic product growth slowed to 6.6 percent in 2018 and is projected to drop to 6.2 percent this year, according to the International Monetary Fund.
"Stocks in Asia were mostly positive on Friday and European and US equity futures were also pointing to a firmer start following yesterday's rebound in risk appetite", wrote Raffi Boyadjian, an investment analyst at XM. Retailers came under especially heavy selling pressure after Macy's issued a dismal earnings report and cut its full-year forecast.
Investors across financial assets have been gripped by developments in the US bond market.
Those concerns stem in part from the U.S.
If all the talk about yield curves sounds familiar, it should.
The S&P 500 slid 71.64 points or 2.45% to 2,854.68. The price of benchmark USA crude slid 3.9% to $54.88 per barrel. "However, today, things are backwards - 10-year interest rates are far below short-term rates".
The latest inversion has since reversed, albeit marginally, and yields on 30-year Treasuries rose off the record 1.965% low hit in Asian trading.
A part of the yield curve has been fully inverted since May, when the 10-year bond yields fell below the 3-month Treasury bill.
Bank of America technical strategist Stephen Suttmeier wrote: "The US equity market is on borrowed time after the yield curve inverts".
The local currency was boosted by stronger-than-expected job figures - which revealed 41,100 new jobs were created in July, with the unemployment rate steady at 5.2 per cent.
The curve inverted to as much as minus 1.7 basis points by 1045 GMT US2US10YT=TWEB.
Oil prices plunged with Brent crude losing another 2% to $58.4 a barrel, after shedding 3% overnight. The dollar index .DOXY rose 0.15%, with the euro EURO= down 0.26% to $1.1109.