Bond Rates Fall In The U.S., Draghi Says Not To Worry, Asia Mixed As RBNZ Indicates Rate Cuts Ahead

The U.S. 10-Year Rate Resumes Its Fall

The rate on the U.S. 10-year treasury resumed its fall today. The rate is now hovering just above a 10-year low as traders and investors fret over recession fears. The fears, stoked by weakening economic data, is not misplaced but is perhaps overblown. The fall in the 10-year T-bill has created an inversion with the 3-month note, a sign of recession, but one that tends to lead the market by at least a year. Over the last 50 years, a yield curve inversion has correctly predicted a U.S. recession every time but once.

The Dow Jones Industrial Average was showing the most weakness in early pre-market trading. The blue-chips were indicated to open with a loss of -0.20% with the S&P 500 down about -0.12% and the NASDAQ Composite hugging the flat-line. In economic news there is at least one sector benefiting from lower interest rates; the housing sector. Mortgage rates fell to 4.45% in the last week as economic slowdown pressure interest rate outlook. The lower rates for mortgages resulted in a near 9.0% increase in mortgage applications which is well above expectations. The rise in apps points to a more robust housing market and that is good for the homebuilders.

European Markets Fall, Draghi Says Slowing Growth Does Not Mean Recession

European markets were mostly lower in early Wednesday trading. The UK FTSE led with a loss near -0.30% at midday with the DAX and CAC not far behind. Trading in the UK was weighed down by Brexit angst that is unlikely to be alleviated soon. In Brexit news, Theresa May has said she can lay out her own data for Brexit if she can get more support from Parliament. Parliament is slated to vote on several issues later today that will help it determine the course it would like Brexit to take.

In stock news shares of Fiat Chrysler advanced 3% after reporting it was a takeover target for Renault. Norsk Hydro also moved sharply higher after announcing it had made a successful bid with Brazil that would allow it to ramp up production at its facility there. Shares of that stock were up about 3.0%. Swedbank, however, were not so lucky. Shares of its stock fell more than 7.0% after a local news station revealed it had documents showing the bank failed to comply with money laundering regulations.

Asia Mixed, Reserve Bank of New Zealand Indicates Rate Cut Ahead

Equity indices in Asia were firmly mixed in Wednesday trading. The Shanghai Composite led gainers with an advance of 0.85% but activity in the region was not in step. The Japanese Nikkei fell about a quarter point while the Hang Seng advanced 0.56% and the Kospi and ASX both closed with much smaller moves.

The Reserve Bank of New Zealand released its policy statement in the overnight hours. The central bank held rates steady which is as expected but shocked markets with their commentary. The bank says that in light of global conditions and economic activity in New Zealand the next policy move was most likey a rate cut.