In This Article:
(Updates prices throughout, adds Asian shares)
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan falls 0.6 pct, Nikkei opens sharply lower
* Japanese yen near six week highs on global growth fears
* Australian 10-year bond yields at record lows
* U.S. recession risk flashing amber - analysts
By Swati Pandey
SYDNEY, March 25 (Reuters) - Investors dumped shares on Monday and fled to the safety of bonds while the Japanese yen hovered near a six-week high as risk assets fell out of favour on growing worries about an impending U.S. recession, sending global yields plunging.
U.S. stocks futures turned negative in early Asian trading with E-minis for the S&P 500 skidding 0.5 percent. MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.6 percent to a one-week low. Japan's Nikkei tumbled 2.9 percent, South Korea's Kospi index declined 1.5 percent while Australian shares faltered 1.3 percent.
On Friday, all three major U.S. stock indexes registered their biggest one-day percentage losses since Jan.3 with the Dow sliding 1.8 percent, the S&P 500 off 1.9 percent and the Nasdaq dropping 2.5 percent.
Concerns about the health of the world economy heightened last week after cautious remarks by the U.S. Federal Reserve sent 10-year treasury yields to the lowest since early 2018.
Adding to the fears of a more widespread global downturn, manufacturing output data from Germany showed a contraction for the third straight month. And in the United States, preliminary measures of manufacturing and services activity for March showed both sectors grew at a slower pace than in February, according to data from IHS Markit.
In response, 10-year treasury yields slipped below the three-month rate for the first time since 2007. Historically, an inverted yield curve - where long-term rates fall below short-term - has signalled an upcoming recession.
"We have re-run our preferred yield curve recession models, which now suggest a 30-35 percent chance of a U.S. recession occurring over the next 10-18 months," said Tapas Strickland, markets strategist at National Australia Bank.
Typically a 40-60 percent probability sees a recession within the next 10-18 months, Strickland added, basing the analysis on previous recessions.
"The risk of a U.S. recession has risen and is flashing amber and this will keep markets pricing a high chance of the Fed cutting rates."
As bonds rallied on Monday, yields on 10-year Japanese government bonds slumped to minus 8 basis points, the weakest since September 2016. Australian 10-year year yields plunged to a record low of 1.756.