End of week wrap: Recession concerns are back in the main

Risk markets are struggling with inverted yields across a wide berth of sovereign curves as global recession concerns are back in the main thanks to a hawkish central bank policy that may have to inflict some economic pain to reign in core inflation. In that environment, the current level of risk-free yields makes investing in equities less attractive relative to bonds.

European PMIs were weak across sectors and countries. For the past few months, traders have wondered whether services would catch down to manufacturing as is typically the case or if the divergence could continue given the oddity of the post-Covid cycle. Based on today's prints, the risk of services catching down has gone up markedly, and as problematic, the press release stated that high inflation and tight financial conditions were weighing on demand.

Stocks in Asia traded lower Friday, and most markets in the region were down for the week, with Hong Kong's Hang Seng losing almost 6% on the week -- a reflection, perhaps, of investors' concerns about the lower growth trajectory of China and the lack of meaningful stimulus on the horizon.

Across asset classes, 10-year US Treasury yields are lower, oil futures are selling off yet again, and the US Dollar is stronger vs most peers -- all indicating a bit of a risk aversion into the weekend.