Global Markets Slide, Yields Collapse As European Recession Deepens

Friday, March 22, 2019
By Paul Martin

by Tyler Durden
Fri, 03/22/2019

After yesterday’s furious rebound in the S&P, which almost appeared staged to confirm the Fed hasn’t lost control after its shocking doubling down on dovishness which resulted in a bizarre drop in stocks in the last 30 minutes of trading on Wednesday, the rally once again fizzled overnight, dragged lower by European stocks with U.S. equity futures following, while the euro tumbled and 10-year German bunds slumped into negative for the first time since 2016 after miserable data from the German manufacturing sector renewed worries about global growth on Friday.

The Stoxx Europe 600 reversed earlier gains, with German shares tumbling 0.6% to hit their lowest in two weeks as markets in Paris and London FTSE tumbled 0.8% after Markit reported that sentiment in Germany’s manufacturing sector cratered, plunging to 44.7, the lowest since 2012.

Europe’s auto sector led the fall, dropping one percent, while industrial goods and banks dropped sharply as well. Notable movers this morning included Aggreko (+3.8%) at the top of the Stoxx 600 after being upgraded to buy at Stifel Nicolaus. Smith’s Group (+1.1%) are in the green following the company stating they plan to separate their medical business and thereafter separately list it in the UK.

“Numbers like the ones we have seen this morning from the European manufacturing sector in Europe would suggest there is more weak data to come,” said Tim Graf, EMEA Head of Macro Strategy at State Street Global Advisors. “Everybody is looking for that inflection point, I guess, for when it is finally going to get better – and it’s not quite arrived yet.”

“Manufacturing output has been declining, which means that growth continues to be based on service sector developments,” Bert Colijn, Senior Economist at ING Bank NV in Amsterdam, said in email to clients. “To fire on both cylinders again, the euro zone seems to require the global growth outlook to improve.”

The MSCI World index slipped 0.2%, pulling away from the 5-1/2 months high hit earlier in the week. U.S. stock futures indicated the souring mood would spill over to Wall Street, with e-mini futures for the Down Jones, S&P and Nasdaq all down 0.5%.

Meanwhile, on Friday Bloomberg reported that U.S. officials downplayed the prospect of an imminent trade deal with Beijing, just as a U.S. trade delegation headed by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin is set to visit China on March 28-29.

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