The Australian share market is set to tumble as Wall Street suffered its worst trading day of 2019 due to a warning sign for a potential US recession.
Key points:The interest rate on long-term US Treasury bonds has dropped below the short-term rate in a phenomenon called the inverted yield curveThe last time this happened was shortly before the GFCIn response, ASX futures have plummeted by 132 points
The Dow Jones index plunged by 800 points to 25,479, or 3 per cent, led by a sell-off in major banks like JP Morgan, Citigroup and Bank of America.
The benchmark S&P 500 and tech-heavy Nasdaq indices also fell off a cliff, dropping 3 per cent each.
Likewise, it was a sea of red on European markets with London’s FTSE down almost 1.5 per cent.
In response, ASX futures had plummeted by 132 points, or 2 per cent, by 7:00am (AEST).
Investors fled from the stock market due to bond markets signalling an upcoming US recession.
Market snapshot at 7:00am (AEST):ASX SPI futures -2pc at 6,403, ASX 200 (Wednesday’s close) +0.4pc at 6,596AUD: 67.47 US cents, 55.95 British pence, 60.56 euro cents, 71.46 Japanese yen, $NZ1.05US: Dow Jones -3.1pc at 25,479, S&P 500 -2.9pc at 2,841, Nasdaq -3pc at 7,774Europe: FTSE 100 -1.4pc at 7,148, DAX -2.2pc at 11,493, CAC -2.1pc at 5,251, Euro Stoxx 50 -2.2pc at 3,284Commodities: Brent crude -3.8pc at $US59/barrel, spot gold +1pc at $US1,516.09/ounce, iron ore +1.6pc at $US90.72/tonne
The warning came from a phenomenon called the inverted yield curve — which has happened only five times since 1978 and has been the precursor for economic recessions 22 months later, on average, according to research from Credit Suisse.
For the first time in more than a decade,