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Good morning. Curve inversion will remain the theme of the day, the protests in Hong Kong are taking a toll and Jeremy Corbyn proposed a new plan to stop no-deal Brexit. Here’s what’s moving markets.

Doom and Gloom

Yield curves are inverting all over the place and that has sent markets into a spin. To be clear, the curve inverting is often taken as a sign that recession is on the way, a feeling which won’t have been helped by German GDP contracting in the second quarter. There’s a slew of data from the U.S. coming Thursday, including manufacturing, industrial production and retail sales numbers, all of which will be very closely watched for slowdown signs – particularly after 30-year Treasury yields dropped below 2% for the first time.

Complicated Reactions

With all that inversion going on, the question to ask is what that means for various markets. For stocks, it's complicated. An inverted curve is generally considered a major signal for recession but it comes with a significant lag and equities can stay in bull mode for anything from two months to two years, so bailing out now may not be the best move. If one is to look at bond yields, Armageddon is already being priced in and JPMorgan Chase & Co. strategists think yields are heading toward zero fast. To repeat something from this newsletter before: If you aren’t doing so already, starting paying attention to bond markets immediately.


The protests in Hong Kong are taking a severe toll on a local economy already suffering from the side effects of the global trade war. Since early July, about $600 billion of market value has been wiped off the stock market, but that is attracting Chinese investors to equities that look increasingly cheap while seeming to put off IPO candidates. President Donald Trump waded into the turmoil further with a series of tweets that linked the protests to the ongoing trade battle between the U.S. and China and heaped praise on Chinese leader Xi Jinping.

Caretaker Government

Brexit’s all about speculation with Parliament in recess, so here’s two more scenarios to add to the conversations you have about what could end up happening. Labour leader Jeremy Corbyn asked rival parties to support him as prime minister in a coalition designed to block Boris Johnson’s government from pursuing no-deal. The Liberal Democrats rejected the idea. Elsewhere, a senior U.K. Conservative suggested Johnson could pull the U.K. out of the European Union in the next 10 days, without a deal, in a surprise move designed to outflank his opponents. The problems that would cause are, fairly obviously, numerous.

Coming Up...

Those curve fears sent stocks down in Asia, though not as severely as in either Europe or the U.S. European futures are pointing to a mixed open. Oil prices dipped the most in a week Wednesday amid the swoon in global financial markets and after U.S. crude stockpiles swelled. In the U.K., retail sales data will arrive before the avalanche of U.S. economic reports and ahead of results from Chinese e-commerce behemoth Alibaba Group Holding Ltd. 

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours.

  • Fan of Italian political drama? Next week’s going to be a feast.
  • A lot of Americans say they can’t afford a vacation.
  • South American glaciers have a bigger problem than climate change.
  • France is considering relaxing its archaic broadcasting rules.
  • The secretive brother running side bets for Chanel.
  • A pink Russian diamond is about to sell for a lot of money.
  • Smart email could change the way we talk.

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To contact the author of this story: Sam Unsted in London at sunsted@bloomberg.net

To contact the editor responsible for this story: Tom Lavell at tlavell@bloomberg.net

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