Stocks opened slightly lower today as investors take in the latest news in the trade war between the U.S. and China and now Mexico. Some of Wall Street’s biggest banks are warning investors about growing recession risks from escalating trade tensions. JPMorgan Chase has issued a recession warning, saying there is more downside to come. Additionally, Morgan Stanley said a global recession could start within nine months if the U.S. imposes 25% tariffs on an additional $300 billion of Chinese goods. It looks as if global growth could slip below trend for the rest of this year.
Bond prices are up, and the 10-year is yielding 2.11% Government bond yields have tumbled this year as investors moved to price in an economic slowdown and central bank easing. The gap between the three month and 10-year treasury, a key recession indicator, is sending strong warning signs.
U.S. manufacturing index dipped to the lowest level in almost 10 years in May. The overall index has fallen by almost six points over the last year. Manufacturing production is set to act as a further drag on GDP. The biggest reason for the drop comes from customers postponing orders due to growing uncertainty about global outlook.