Markets' favourite recession indicator, the so-called yield curve inversion, has just flashed its biggest warning since 2007 about a possible US recession, sending US stocks into tailspin overnight. The spread between two-year and 10-year Treasury yields fell as low as negative 4.2 bps, marking the worst inversion since May 2007. That's baffling, because US consumer spending has remained strong and jobless claims sharply low.
STREET PULSE: Where we stand Asian shares eked out meager gains in early trade, as higher Wall Street futures provided some relief to investors after an overnight US selloff.
Read More  | SGX Nifty traded 10 points higher at 7 am (IST), signalling positive sentiment. MSCI index for Asia-Pacific shares outside Japan fell 0.03%, Japan's Nikkei rose 0.04% and Australia's shares gained 0.07%. |
| US yield curve inversion deepened on Tuesday to levels not seen since 2007, which sent Wall Street stocks lower. Dow slipped 121 points, or 0.5%, while S&P500 and Nasdaq finished down 0.3%. |
Oil prices gained, after an inventory report showed US stockpiles fell more than expected. Brent rose 41 cents, or 0.7%, to $59.92 a barrel while WTI crude rose 57 cents, or 1.0%, to $55.50.
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Bond with the Best... Bond yields tumbled to the lowest in about three weeks as the fear of government profligacy receded after RBI decided to transfer a record surplus to the government, including Rs 52,637 crore of excess capital. While traders have been speculating over an expected fiscal stimulus using these proceeds, concerns about the government having to borrow more than it budgeted seem to have been assuaged, despite lower-than-forecast tax collections.
Read More | Rupee spurts by 54 paise, logs biggest single-day gain in 5 months >>> |
| Bimal Jalan panel budgeted for likely 'rainy days' at RBI >>> |
Out of the Box... Unlisted Indian firms may soon find it easier to raise capital overseas through depository receipts. Sebi plans a liberalised regime for issue of GDRs and ADRs that will help startups and others raise funds. Currently, only listed companies can issue the instruments. The regulator is also expected to ease norms pertaining to two-way fungibility — conversion of shares to depository receipts and vice versa.
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Pay Gap… Captains of India Inc. took home about 16% more in average salary last year, even as corporate earnings remained tepid, as companies sought to retain their managing directors and chief executive officers to steer them through a difficult business environment. That was higher than the 9-9.5% average industry salary increase, sparking concerns over the wide pay gap between those at the helm and other employees.
Read More Bad Loan Bogey... Fears of a spike in bad loans in the banking sector have returned with a likely surge in defaults in NBFCs and lower-rated companies, amid tight credit conditions. Debt of Rs 2.4 lakh crore is currently being put through the central bank's June 7 framework to resolve stressed assets, but what is worrying analysts is that at least 70% of this is chronically stressed and could lead to another wave of bad loans.
Read More Meanwhile... Sebi chief Ajay Tyagi gave domestic mutual funds an earful on Tuesday, reminding them that they are not banks and are not around to provide risk capital. The remarks come in the wake of criticism of debt mutual funds investing in companies beyond their capacity and not following the best risk practices.
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