Good morning from Singapore. We continue to see the market pricing in what we fear the most – a recession. Investors shifted toward defensive stocks such as healthcare, after the latest private payrolls report from ADP gave another sign the economy is slowing.
The 10-year Treasury yield also fell to its lowest since mid-September, and its spread with the 3-month Treasury yield continued to grow. Such a yield-curve inversion is seen by many on Wall Street as a signal that a recession is near. Gold, seen by many as a safe asset, surpassed the $2,000 mark, and the dollar strengthened against Asian currencies. Yet another mixed session is seen in store for Asia-Pacific markets today.
Investors are going to closely examine Friday's U.S. unemployment data and nonfarm payroll numbers, which will almost certainly help shape the Federal Reserve's interest rate policy.
A widening rift between Washington and Beijing is adding to long-term worries about the economy. In fact, the IMF estimated in a Wednesday report that global tensions could disrupt foreign direct investment to the tune of almost 2% of long-term global output. In the report's words, "a fragmented world is likely to be a poorer one."
China has warned the U.S. to steer clear of a closer relationship with Taiwan — which Beijing refers to as its "internal affairs." House Speaker McCarthy in a press conference following his meeting with President Tsai compared Taiwan to Ukraine, adding that if the United States had delivered more weapons to Ukraine, it could have changed Moscow's pre-invasion calculus.
And we'll see what European leaders have to say as they visit Beijing to denounce Russia's invasion, following Chinese President Xi Jinping's visit with Russian President Vladimir Putin. EC President von der Leyen's words seem to match the sentiment on Wall Street: Things have become, she said ahead of her trip, "more difficult in the last few years."
