Asian stocks are in a sea of red on recession fears

  • Asian stocks are under pressure with Japan's Nikkei falling more than 250 points. 
  • US equities tanked on Wednesday as the Treasury yield curve inverted for the first time in over a decade. 

Asian stocks are feeling the pull of gravity on heightened recession fears and the resulting slide in the US stocks on Wednesday.

As of writing, Japan's Nikkei is reporting a 1.3% or 266 points. Stocks in Australia and New Zealand are down 2.14% and 1.22%, respectively.

Meanwhile, Hong Kong's Hang Seng is currently shedding 0.67% or 170 points and the Shanghai Composite index is reporting a 1% drop.

The US stocks tanked Wednesday with the Dow Jones Industrial Average falling by 800 points on recession fears.

The US treasury yield curve inverted with the 10-year Treasury yield falling below the two-year yield for the first time since 2007.

A curve inversion indicates that the markets have lost faith in the possibility of a rebound in inflation and employment. Also, curve inversions are known to precede economic recessions.

The developments in the bond market drew President Trump's ire, who tweeted that Federal Reserve (Fed) Chairman Jerome Powell is “clueless.”

President Trump added that Fed’s reluctance to ease policy more aggressively is “holding us back".

Self-fulfilling prophecy

Some observers believe that the inverted yield curve – which is widely considered as one of the most prescient indicators of a recession – could end becoming a self-fulfilling prophecy that bad times are coming.

Further, many observers, including Goldman Sach's Korapaty believe there is little evidence in the US economic data to suggest a recession is imminent.

That narrative will likely become entrenched, lifting the US stocks higher if the US retail sales number due today blows pats expectations.

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