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Mar 14, 2022

Saturday, Aug 13, 2022 - 16:41:04

US economy flashes a recession warning sign

US economy flashes a recession warning sign

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New York (CNN Business)Surging oil and gas prices have raised recession alarm bells around the world. But another economic indicator is starting to look ominous: The yield curve is flattening.

Wall Street closely watches the difference, or spread, between short-term government bond yields, most notably the 2-year Treasury, and longer-term bond rates like the 10-year Treasury.
As that spread diminishes, investors worry that the yield curve could eventually invert, meaning that short-term rates would be higher than long-term yields. As of Friday, the difference was just 0.25%, with the 10-year yield at around 2% and the 2-year yielding 1.75%.
    The gap widened a bit Monday, as the 10-year rose to 2.1% and the 2-year yield was up to about 1.82%, making the spread 0.28%.
      Inverted yield curve often occurs before recessionsRead MoreAn inverted yield curve has often been a potential recession signal. The yield curve inverted in 2019 before the 2020 Covid-induced recession. It also did so in 2007 before the 2008 Global Financial Crisis/Great Recession. And it inverted in early 2000 right before the dot-com/tech stock meltdown.When investors want higher rates for short-term bonds, it's an indication that bondholders are nervous. Typically, rates for long-term bonds are higher because you have to wait longer to get paid back. So how worried should investors be that the yield curve might invert?Some argue that the only reason this is happening is because of Russia's invasion of Ukraine and the resulting spike in commodity prices. "The risks of a recession are building but not necessarily immediate unless the global geopolitics dramatically deteriorate from this delicate starting point," Jim Reid, a strategist with Deutsche Bank, said in a report.The Feds job just got even harderThe Federal Reserve, which is widely expected to raise interest rates later this week, may be careful to not raise rates so aggressively that short-term yields increase even further and wind up flipping the yield curve. That could cause a slowdown in the job market. And the Fed is supposed to keep an eye on unemployment rates as well as inflation."Chair [Jerome] Powell will make it clear that the Fed is aware of its dual mandate and does not want to invert the yield curve and produce a recession," Jay Hatfield, chief investment officer at ICAP, said in a report. Inflation concerns existed before Russia-UkraineAlthough geopolitical tension could be distorting prices, inflation pressures were already building before the Russian attack on Ukraine."Russia/Ukraine is only pulling forward the natural slowing in the economy that would have occurred as the Fed tightened policy," said Tom Essaye, founder of Sevens Report Research, in a note last week. Essaye argues that Fed rate hikes and a slowing economy would have likely led to an inverted yield curve at some point later this year even if Russia and Ukraine weren't in the headlines."The looming rate hikes (which are still coming) will combine with the growth slowing impulse of higher commodity prices and higher inflation to bring a sooner than previously expected slowing of growth," he said.Rising short-term rates could also create problems for large Wall Street firms. Although higher rates tend to boost profits for loans, they also make trading, particularly for bonds, more of a gamble.
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      Economist explains the risks of recession and stagflation 02:40"The recent flattening of the yield curve and volatility in capital markets are emerging risks; thus, we are more cautious on the largest banks," analysts at research firm KBW said in a recent report.The fact that bond yields are low isn't necessarily a bad thing. Rates fall when investors are buying bonds. So traders are clearly still finding US Treasury debt to be stable enough to keep flocking to it. But it is unusual to see short-term rates fall this sharply.One strategist noted that it doesn't matter if investors are buying bonds because they perceive them to be safe. There is still a lot to worry about.
        "The recession drumbeat is gaining in volume," Nancy Tengler, CEO and CIO of Laffer Tengler Investments, said in a report. "Of course there are many reasons to be concerned. Soaring inflation, rising energy costs, an almost sure recession in the Euro Zone and a dangerously flat yield curve." "Never mind that the yield curve is being distorted by a massive flight to quality," Tengler added. "An inversion is an inversion."

        News Source: CNN

        Tags: commodity prices said in a report that short term russia ukraine the difference year treasury higher rates the risks term yields inverted wall street a recession bond yields

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        Urgent warning over ‘toxic cocktail’ of dirty air that could trigger deadly attacks next week

        MILLIONS of Brits have been told to take "extra precautions" as a cloud of dirty air is set to engulf the country this week.

        High levels of pollution combined with warm temperatures could cause a "toxic cocktail", which could pose a threat to people suffering asthma and other lung conditions.

        1Over half of all those with asthma say that toxic air is a trigger for their symptomsCredit: Getty Images - Getty

        Leading charity Asthma and Lung UK, have urged people with lung conditions to take their daily preventer medication as prescribed and carry a reliever inhaler at all times.

        They also suggested that people avoid strenuous exercise outside and for those who live near busy roads – where pollution is highest to keep their windows closed. 

        According to the charity, a recent survey found that over half (53 per cent) of all those with asthma say that toxic air is a trigger for their symptoms.  

        Pollutants found in toxic air in the air irritate the airways, making them swell and tighten up. This can cause breathing problems and trigger asthma attacks, which can be life-threatening in severe cases. 

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        Extreme heat makes pollution worse by slowing down air flow, meaning polluted air remains at ground level for longer. 

        UK AIR, the UK’s air pollution alert system predicted high levels of pollution in the East of England, with the rest of England forecast to experience moderate levels of pollution. 

        High air pollution episodes in the UK are generally rare, but are likely to become more frequent because of climate change.

        Emma Rubach, head of health advice at Asthma + Lung UK, said: “With air pollution forecasted to be higher than normal in England next week, along with high temperatures, people with lung conditions could be facing a toxic cocktail of dirty air that could increase the risk of asthma attacks and symptom flare-ups.

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        “We know that half of people with asthma and COPD are triggered by air pollution, so we’re urging people to be vigilant and take extra precautions to protect themselves," she added.

        She also said the forecast should be a "wake-up call" to government to "commit to improve air pollution alerts so more of the public know what they are and what to do on days like this when air pollution spikes".

        Extreme heat slows air flow, meaning polluted air remains at ground level for longer. 

        The hot weather is now set to continue into next week, with the Met Office predicting highs of 35C this weekend.

        A heatwave health warning had been in place until Sunday, but the UK Health Security Agency (UKHSA) has now extended this to Tuesday August 16.

        Chiefs first raised the alarm on Tuesday warning temperatures wouldn't drop below the low 20s.

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        Now, the Met has said temperatures will remain in the high 20s well into the start of next week - with northern regions seeing temperatures decline from Monday.

        Medical chiefs have said that young children, those with underlying health conditions and the elderly are more likely to experience adverse health effects.

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