In an unconventional development, often preceding a downward trend in global economic performance, the bond market is beginning to send worrying signals to investors around the world.
Risks and uncertainties about the global economy have confounded global markets since the beginning of August by pushing for a looming trade war between Washington and Beijing, although Washington has postponed tariffs on a range of Chinese products.
Adding to the growing unrest in Hong Kong, as well as the decline in US Treasury yields and the contraction of the German economy in the second quarter, prompted investors to resort to safe havens.
The global markets fell during the 14 days of this month, rates ranging between 4 and 15 per cent, while gold prices and the Japanese yen to high levels driven by the pursuit of investors for safe havens.
Gold is still trading at its highest level in six years (April 2013) gains of 7.5 per cent during the period, the Japanese currency rose to the highest level in seven months with a gain of 2.7 per cent, and the Swiss franc rose to the highest level this year with a gain of 2.1 per cent.
According to the monitoring, the British FTSE fell 6.2 percent, followed by the German DAX index 5.7 percent, and about 5.2 percent for the Japanese Nikkei index, and about 4 percent for the Shanghai index.
As for the US indices, they fell less than their European counterparts, where the Dow Jones fell about 5.2 per cent, equivalent to 1385 points, while the Nasdaq fell 4.9 per cent, losing about 400 points, while the Standard & Poor’s index fell 4.7 per cent during August trading.
The major currencies were mixed, with the dollar falling 0.5 per cent and sterling 0.8 per cent.
Forecasts on interest rate cuts are still the main influencer of the dollar, with Brexit without an agreement from the European Union dominating the currency’s performance.
Oil prices have fallen dramatically, losing about 15.3 per cent to $ 55.2 a barrel.
The world’s largest economies may now face the risk of an economic crisis that may not require much.
The UK economy shrank in the second quarter, and Italy’s growth stagnated, while the German economy, the world’s fourth largest, contracted in the three months before June.
Mexico’s economy is expected to remain weak this year, while data suggest that Brazil experienced a recession in the second quarter.
Germany, Britain, Italy, Brazil and Mexico are among the top 20 economies in the world. Singapore and Hong Kong, both smaller but of global commercial significance, also suffer.
The Chinese economy is facing the slowest growth in nearly three decades, with the country experiencing a long-term trade war with the United States, which plans to impose new taxes on Chinese exports in September and December.
Although economic growth has been declining in each country due to a combination of determinants, the global industrial recession and sharp decline in business have made matters worse.
Last month, the International Monetary Fund lowered its forecast for global economic growth this year to 3.2%, the weakest expansion since 2009, while cutting its 2020 forecast to 3.5%.
These indices have caused growing concern among investors as the bond market is not promising, with more than a third of asset managers surveyed by Bank of America forecasting a global recession in the next 12 months.
The impact of the trade war between America and China
Neil Schering, chief economist at Capital Economics, says he sees no clear justification for the dismal recession.
Corporate spending on assets, such as equipment, has stabilized globally and the labor market is flexible, he said.
However, Schering also points to some of the major risks that have affected the economy recently.
First, the trade war between Beijing and Washington says that if Beijing and Washington continue to escalate tensions, it could affect corporate confidence.
The International Monetary Fund has warned that growth in 2020 will halve if the conflict intensifies, according to CNN.
Another major risk is the failure of central banks to act, causing a negative reaction in financial markets that feed on the real economy.
The US Federal Reserve cut interest rates last month for the first time in 11 years, while pressure on China to cut its key interest rate for the first time in 4 years.
Other central banks from India to Thailand have also cut interest rates, and further cuts are expected.