Dow set to tumble after bond market flashes a recession warning - CNN

Here's what happened: The 10-year Treasury bond yield fell to 1.627% Wednesday morning, below the 1.632% yield of the 2-year Treasury bond. It marked the first time since 2007 that 10-year bond yields fell below 2-year yields.

US stock futures fell as investors sold stock in companies and moved it into bonds. The Dow (INDU) was set to open about 1.4% lower. The broader S&P 500 (SPX) futures were down 1.4% and Nasdaq (COMP) futures sank 1.6% Wednesday morning.

CNN Business' Fear and Greed Index signaled investors were fearful. The VIX (VIX) volatility index spiked 10%.

Investors are on edge because the German economy shrank in the second quarter, and the US-China trade war still looms large over markets, despite the latest truce.

As the global economy sputters, investors are plowing money into long-term US bonds. The 30-year Treasury yield fell to 2.06%, the lowest rate on record.

Government bonds — particularly US Treasuries — are classic "safe-haven" assets that investors like to hold in their portfolios when they're nervous about the economy. Stocks, by contrast, are riskier assets that tend to be more volatile during economic slowdowns.

Here's what this all means: Normally, long-term bonds pay out more than short-term bonds because investors demand to be paid more to tie up their money for a long time. But that key "yield curve" inverted on Wednesday. That means investors are nervous about the near-term prospects for the US economy. Bonds and yields trade in opposite directions, so yields sink when investors buy bonds.

Part of the yield curve has been inverted for several months. In March, the yield on the 3-month Treasury bill rose above the rate on the 10-year Treasury note for the first time since 2007. But Wednesday marked the first time in over a decade that the "main" yield curve — the 2-year / 10-year ratio — had inverted.

That spooked Wall Street, because an inversion of the 2/10 curve has preceded every recession in modern history. That doesn't mean a recession is imminent, however: The Great Recession started two full years after the December 2005 yield-curve inversion.

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2019-08-14 12:45:00Z
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WeWork just dropped its filing to go public, revealing its financials ahead of IPO - CNBC

WeWork released its much-anticipated IPO prospectus, joining a flurry of tech companies going public in 2019.

The filing comes as WeWork, which rebranded to the We Company, is widely expected to go public as soon as September. WeWork was recently valued at $47 billion after SoftBank, the company's biggest backer, invested an additional $2 billion in January.

In the filing released Wednesday, the company reported revenues of $1.54 billion and a net loss of more than $900 million for the first six months of 2019. The company also reported that it had 527,000 members as of June 30, an increase of more than 90% from the year before.

It will trade under the ticker WE. 

WeWork, which rents out co-working spaces to startups, freelancers and enterprises, has to plunge cash into real estate in some of the most expensive markets and makes money back over time as companies and individuals pay their rent, or membership. The company reported long-term lease obligations of $17.9 billion in the filing.

According to the prospectus, WeWork's biggest shareholders are the WE Holdings company and entities of Benchmark, JP Morgan and SoftBank. The WE Holdings company is controlled by WeWork CEO Adam Neumann.

The We Company filed confidentially for an IPO in April. The filing didn't include financial specifics, but in its first-quarter business update in May, the company said revenue more than doubled to $728.3 million, helped by expansion into international markets and growing memberships.

In an effort to sway investors, the company has tried to differentiate its losses from money-losing ride-hailing companies like Uber and Lyft, which both went public earlier this year. CFO Artie Minson told CNBC's Deirdre Bosa in May that investors should view WeWork's losses as "investments," adding that renting out work space is a "proven business model."

WeWork is reportedly planning to raise $3 billion to $4 billion in debt before its IPO to help fund growth and prove that it can reach profitability.

The company has been expanding beyond co-working spaces and into new markets. It has launched communal housing complexes under its WeLive business, as well as early education schools called WeGrow.

This story is developing. Please check back for updates.

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2019-08-14 11:16:25Z
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Top 5 Things to Know in the Market on Wednesday - Investing.com

© Reuters.

Investing.com - Here are the top five things you need to know in financial markets on Wednesday, August 14:

1. Signs of economic downturn weigh on sentiment

Worrying data from China and Germany added to fears of a potential global recession.

China’s growth in July in another sign that the trade conflict between Beijing and Washington is denting the world’s second-largest economy.

Trade tensions also dragged on China’s consumer and business confidence with retail sales cooling more than expected while slower-than-forecast growth in revealed a marked loss of momentum.

Germany provided no relief to the gloomy outlook as a slump in exports drove its in the second quarter. The 0.1% quarter-on-quarter decline in led some analysts to speculate that the euro zone’s number one economy could enter recession in the third quarter as tariff conflicts and uncertainty over the U.K.’s departure from the European Union hit the country’s manufacturing sector.

2. Stocks pass from trade relief to economic worries

were mixed in Wednesday’s trade in the wake of Washington’s announcement a day earlier that it would delay the implementation of some tariffs on Chinese imports from Sept. 1 to Dec. 15.

The ensuing relief rally led to sharp gains on Wall Street at Tuesday’s close that quickly spread to Asian markets. Hong Kong’s was the exception, depressed by fears that Beijing will use force to crack down on local protesters.

But buying enthusiasm faded overnight with and U.S. futures pointing to a lower open as markets processed the fact that the U.S. delay in tariffs brought the two sides no closer to resolution.

3. U.S. 2- and 10-year notes on watch amid yield tailspin

A worldwide bond rally was back in swing sending yields on a sharp decline after a brief pause a day earlier.

Markets are keeping a close eye on the yields for the U.S. 2- and 10-year Treasury notes as the spread hovers around just one basis point. If the passes below that of the, it would result in an inverted yield curve that economists warn could be a sign of pending recession.

The flight to safety and central bank policy easing worldwide has sent bond yields into a tailspin. The on the German Bund, the euro zone’s safe-haven benchmark, hit a new record low of -0.64% after the GDP failed to elicit any signs of urgency from the government in providing some sort of fiscal support package to the economy.

4. Cisco steps up to earnings plate

Cisco (NASDAQ:) will be in the earnings spotlight after the close as the second-quarter reporting season winds down, with less than 50 S&P firms left on the calendar.

The company will report amid concerns that weaker enterprise spending on networking equipment may dent growth.

A slowdown in network spending was put in the spotlight last week when NetApp (NASDAQ:) warned its quarterly revenue would miss estimates, due to uncertainty over the global outlook.

5. Oil drops on unexpected inventory build

slid amid further signs of global economic weakness and a surprise build in U.S. crude stockpiles.

The American Petroleum Institute’s weekly report released late Tuesday showed that unexpectedly rose 3.7 million barrels.

The U.S. Energy Information Administration will release at 10:30 AM ET ( 14:30 GMT) amid expectations for a draw of 2.78 million barrels.

Read more: - Barani Krishnan

-- Reuters contributed to this report.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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2019-08-14 10:04:00Z
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Shrinking German economy 'on edge of recession' as exports stutter - Reuters

BERLIN (Reuters) - A slump in exports sent Germany’s economy into reverse in the second quarter, data showed, as its manufacturers bore the brunt of a global slowdown amplified by tariff conflicts and uncertainty over Brexit.

FILE PHOTO: Volkswagen export cars are seen in the port of Emden, beside the VW plant, Germany March 9, 2018. REUTERS/Fabian Bimmer/File Photo

Gross domestic product (GDP) fell 0.1% quarter-on-quarter, in line with a Reuters poll of analysts, as several observers raised prospects of another contraction in the third quarter, and the industrial sector suggested the government should ditch its balanced budget and kick-start growth via fiscal stimulus.

On a calendar-adjusted basis, the annual growth rate in Europe’s largest economy slowed to 0.4% in the second quarter from 0.9% in the first, Wednesday’s Federal Statistics Office data showed. For 2019 overall, Berlin expects growth of just 0.5%.

“The bottom line is that the German economy is teetering on the edge of recession,” Andrew Kenningham from Capital Economics said, noting that exporters were facing an even bigger potential hit if a threatened no-deal exit from the EU by Britain actually materialized on Oct. 31.

Many economists define a recession as two consecutive quarterly contractions.

Despite Wednesday’s headline quarterly figure matching expectations, markets also took fright, with the yield on Germany’s benchmark 10-year government bond hitting a record low of -0.624%.

The global slowdown has impacted growth across western Europe, but Germany’s traditionally export-reliant economy has been particularly vulnerable.

The statistics office said that net trade slowed economic activity as exports recorded a stronger quarter-on-quarter decrease than imports.

Construction was also a drag, after the sector pushed up overall growth in the first three months due to an unusually mild winter.

“Today’s GDP report definitely marks the end of a golden decade for the German economy,” Cars ten Brzeski from ING said.

“It was a decade of strong growth on the back of earlier structural reforms, fiscal stimulus, localization at its peak and steroids provided by the ECB in the form of low-interest rates and a relatively weak euro.”

DOMESTIC SAFETY NET?

Domestic demand has become an important growth driver for Germany in recent years as consumers benefit from record-high employment, inflation-busting pay hikes and low borrowing costs.

Positive contributions came from that source in the second quarter, as household consumption, government expenditure and gross fixed capital formation increased on the quarter, the statistics office said.

But analysts suggested the positive impact of those factors was waning.

“For a year now, the German economy has been only crawling forward,” UniCredit analyst Andreas Rees said, with the many uncertainties facing German exporters presaging more pain in the rest of the year.

“Besides Brexit, this is above all the U.S.-Sino trade dispute and possible U.S. tariffs on European cars,” Rees said.

ING’s Brzeski said that, with trade conflicts, global uncertainty and the struggling automotive sector having “finally brought the German economy to its knees,” a national debate about fiscal stimulus would get more heated.

In an usual move, the powerful BDI industry association joined the growing chorus of voices demanding that the German government ditch its balanced budget rule.

“In contrast to the debt brake, which is enshrined in the constitution, the black zero (balanced budget) should be called into question in an economically fragile situation,” its managing director Joachim Lang wrote in a guest article in Wednesday’s edition of business daily Handelsblatt.

Slideshow (3 Images)

His comments came after a government official told Reuters last week that Berlin was considering issuing new debt to finance a costly climate protection package.

Chancellor Angela Merkel had on Tuesday poured cold water on domestic and international calls for more fiscal stimulus, saying there was no need “right now” for such a move.

Merkel also pointed to already agreed fiscal steps such as the abolishment of the Soli income tax surcharge for most employees from 2021, a relief worth some 11 billion euros per year that is likely to support domestic demand and with it overall growth.

Reporting by Michael Nienaber; editing by Thomas Seythal and John Stonestreet

Our Standards:The Thomson Reuters Trust Principles.

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2019-08-14 06:14:00Z
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5 things to know before the stock market opens Tuesday - CNBC

1. Dow could see a 3-session slide, sinking further from July's all-time highs

Traders on the floor of the New York Stock Exchange.

Brendan McDermid | Reuters

U.S. stock futures were pointing to a lower open on Wall Street on Tuesday, a day after the Dow Jones Industrial Average, S&P 500 and Nasdaq declined for the second straight session. Investors continued to pile into bonds, pushing yields inversely lower on concerns about the U.S.-China trade war — and increasingly, the anti-government protests in Hong Kong. The Dow, S&P 500 and Nasdaq were all roughly 5% off their all-time highs set in July. China's central bank, to the chagrin of the Trump administration, set its currency weaker than 7-yuan-per-dollar for the fourth consecutive session.

2. Bonds are close to flashing their most severe recession red flag yet

The 10-year Treasury yield remained under some pressure Tuesday as the bond market moved closer to sending its biggest recession signal yet. While various yield curve pairs inverted months ago, the 2-year Treasury yield to 10-year spread looks set to go upside down any day now. The yield curve, the plot of U.S. interest rates based on maturity dates, is at its flattest level since 2007 before the Great Recession. An inversion, which happens when shorter-term rates move higher than longer-term ones, has historically been a reliable recession signal.

3. Hong Kong protests close the airport for second day as China warns demonstrators

Protesters occupy the departure hall of the Hong Kong International Airport during a demonstration on August 13, 2019 in Hong Kong, China.

Anthony Kwan/Getty Images

Pro-democracy protesters crippled operations at Hong Kong International Airport for a second day Tuesday, forcing authorities to cancel all remaining flights out of the Chinese territory. State media outlets in China warned that Hong Kong demonstrators are "asking for self-destruction" as they released a video showing Chinese military vehicles amassing near the border of the city. Hong Kong's embattled leader said that "lawbreaking activities in the name of freedom" were damaging the rule of law.

4. CBS nears finalization of a merger valuing Viacom at about $12 billion

The Viacom office in Hollywood, California.

Lucy Nicholson | Reuters

CBS and Viacom are finalizing their merger agreement, negotiating a share exchange ratio that would value Viacom at nearly $12 billion. The talks are ongoing, and nothing has been finalized, people familiar with the matter told CNBC on Monday. Shari Redstone, whose National Amusements is the principal owner of both companies, has advocated for a deal. CBS and Viacom nearly merged a year ago before a rift over who would run the combined company derailed discussions.

5. Shares of Uber, just months after their NYSE debut, hit an all-time low

Dara Khosrowshahi, chief executive officer of Uber Technologies Inc., speaks during an interview in Tokyo, Japan, on Wednesday, July 3, 2019.

Akio | Bloomberg | Getty Images

Uber shares were stable in premarket trading Tuesday after falling to their lowest close ever. The stock, still reeling from last week's massive second-quarter loss, dropped 7.6% to $37. Since its New York Stock Exchange debut in May, Uber has declined about 18% from its initial public offering price of $45 per share. On Monday, early Uber investor Bradley Tusk told CNBC that CEO Dara Khosrowshahi lacks the "ruthless innovation" mentality of the company's early days that turned it into a global phenomenon, and the stock reflects it.

CNBC's before the bell news roundup

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2019-08-13 12:02:21Z
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Asia shares slip as Hong Kong unrest, Argentine peso crash rattle investors - Investing.com

2/2 © Reuters. Men walk past in front of an electric screen showing Japan's Nikkei share average outside a brokerage in Tokyo 2/2

By Stanley White

TOKYO (Reuters) - Asian shares slumped on Tuesday as fears about a drawn out Sino-U.S. trade war, protests in Hong Kong and a crash in Argentina's peso currency drove investors to safe harbors like bonds, gold, and the yen.

MSCI's broadest index of Asia-Pacific shares outside Japan skidded 1%. Chinese stocks fell 1%, while Hong Kong's main market index tumbled 1.7% to a seven-month low.

"The protests in Hong Kong are negative for stocks, which were already in an adjustment phase because there is talk that the trade war will trigger a recession," said Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Kokusai Asset Management Co.

Hong Kong's airport, the world's busiest cargo airport, reopened on Tuesday after protesters managed to close it down the previous day. The mood remained cautious as the increasingly violent demonstrations have plunged the Chinese-ruled territory into its most serious crisis in decades.

The weeks-long protests began in opposition to a bill allowing extraditions to mainland China but have quickly morphed into the biggest challenge to China's authority over the city since it took Hong Kong back from Britain in 1997.

Japan's was also hit hard, down a sharp 1.2% and on course for its biggest daily decline in a week.

In early European trade, the pan-region were unchanged.

U.S. stock futures were 0.23% higher in Asia, but that did little to calm the fragile mood.

Stocks in Singapore shed 1.1% to reach their lowest since June 6 after the government slashed its full-year economic growth forecasts. The city state is often seen as a bellwether for global growth because of its importance as a key trade hub.

The selling in regional markets came as Wall Street stocks took a beating on Monday, with the losing 1.23%.

Sentiment was already weak due to increasing signs that the United States and China will not quickly resolve their year-long trade war. Markets were hit with further turbulence after protesters managed to close down Hong Kong's airport on Monday.

Traders were also on edge after market-friendly Argentine President Mauricio Macri suffered a mauling in presidential primaries, increasing the risk of a return to interventionist economic policies.

Benchmark 10-year Treasury yields were near the lowest in almost three years, gold was pinned close to six-year highs, and the yen was within a whisker of a seven-month peak versus the dollar in a sign of the heightened anxiety in financial markets already battered by global growth woes.

"Long-term rates will continue to fall, and stocks will adjust lower, but this is temporary. Major central banks are cutting rates, which will eventually provide economic support," Mitsubishi UFJ's Ishigane said.

Analysts said that trading could be subdued as many investors are off for summer holidays. Yet, there was no shortage of gloomy news for investors looking to catch their breath from several months of market ructions.

Argentina's peso collapsed on Monday, losing roughly 15% of its value to 52.15 per dollar after crumbling to an all-time low of 61.99 earlier. Voters snubbed Macri by giving the opposition a surprisingly bigger-than-expected victory in Sunday's primary election.

The Merval stock index () crashed 30% and declines of between 18-20 cents in Argentina's benchmark 10-year bonds left them trading at around 60 cents on the dollar or even lower.

Refinitiv data showed Argentine stocks, bonds and the peso had not recorded this kind of simultaneous fall since the South American country's 2001 economic crisis and debt default.

The grim backdrop was enough to push investors into safe-havens, and U.S. Treasury yields dropped across the board on Monday as trade worries and political tensions supported safe-haven assets.

In Asia on Tuesday benchmark 10-year Treasuries yields fell to 1.6403%. On August 7 yields had skidded to 1.5950%, the lowest since October 3, 2016.

rose 0.47% to $1.518.43 per ounce, near the highest in six years.

The yen last fetched 105.41 per dollar, and was within striking distance of 105.03, its strongest since the January 3 flash crash.

Oil prices edged slightly lower in Asian trading as expectations that major producers will continue to reduce supplies ran into worries about sluggish economic growth.

U.S. West Texas Intermediate futures fell 0.22% to $54.81 a barrel.

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2019-08-13 05:39:00Z
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Saudi Aramco's profit; Hong Kong protests; BlackRock's private equity deal - CNN

The rare financial disclosure coincides with renewed interest in a potential initial public offering by Saudi Arabia's state oil producer, and bolsters its status as the world's most profitable company.

Apple (AAPL), for comparison, generated profit of $31.5 billion in the first six months of its financial year.

Aramco has been more public about its finances recently as Saudi officials consider whether to list shares in the company in order to fund projects that could wean the economy off its addiction to oil.

An IPO that was planned for 2018 never materialized. A lack of transparency over the size of the country's energy reserves had caused skepticism about the potential sale and the value of Aramco.

But plans for a public listing as early as next year are now being accelerated following positive investor reaction to a bond sale in April, according to the Wall Street Journal.

2. Hong Kong protests: As protests in Hong Kong escalate, the ramifications for businesses and travelers are growing.

The Hong Kong International Airport Authority has canceled all flights scheduled to depart the major travel hub Monday evening because of a mass demonstration. Flights bound for Hong Kong that have not yet taken off were also canceled.

Shares in Hong Kong's flagship airline, Cathay Pacific (CPCAY), were already down almost 5% on Monday. The company said over the weekend it would cooperate with a directive from China's aviation authority that banned staff from flying to, from and over mainland China if they participate in or support the protests.

An internal memo sent by CEO Rupert Hogg to staff on Monday warned that the carrier has "has a zero tolerance approach to illegal activities."

3. BlackRock deal: BlackRock (BLK), the world's largest asset manager, has cut a flashy deal as part of its push into private equity.

The company said over the weekend that it had made a $875 million investment in Authentic Brands, the company that owns Sports Illustrated, Nine West and Juicy Couture. That makes it the company's largest shareholder.

The investment is the first for BlackRock's new private-equity fund, Long Term Private Capital, which the company said in April was ready to start investing after securing $2.75 billion.

4. Global market overview: US stock futures point lower as investors turn their attention to the protests in Hong Kong.

The Dow is set to open down 100 points, or 0.4%. The S&P 500 and the Nasdaq are set to fall a similar amount.

European markets were largely lower in early trading. Britain's FTSE 100 and France's CAC 40 both shed 0.2%. Germany's DAX rose 0.1%.

Stocks in Asia were mixed. Hong Kong's Hang Seng finished down 0.2%, and the Shanghai Composite rose 1.5%.

The Dow closed down 0.3% on Friday. The S&P 500 shed 0.7%, and the Nasdaq declined 1%. All three recorded weekly losses for the second week in a row.

5. Coming soon: A new Before the Bell, packed with insight from CNN Business reporters and trusted experts. If you're not already getting our emails, click here to sign up for a redesigned newsletter that delivers the news, analysis and market charts you need to start your business day right.

6. Coming this week:
Monday — China vehicle sales; Tencent Music (TME) and Saudi Aramco earnings
Tuesday — Germany inflation rate; US inflation; JD.com (JD) and Tilray (TLRY) earnings
Wednesday — China retail sales; Germany and Europe GDP; UK inflation; Luckin Coffee (LK), Macy's (M) and Canopy Growth (CGC) earnings
Thursday — US retail sales; Alibaba (BABA), JCPenney (JCP), Walmart (WMT) and NVIDIA (NVDA) earnings
Friday — US housing starts and building permits

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2019-08-12 11:19:00Z
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