The Globe and Mail reports in its Wednesday edition that North American stocks plunged on Tuesday as skepticism grew about a United States-China trade accord, and a closely watched recession indicator broke into ominous territory.
The Globe's Ian McGugan writes that the U.S. yield curve, which measures the difference between shorter-term and longer-term government bond yields, narrowed to its tightest point since 2008. The curve is important because short-term interest rates are nearly always lower than long-term rates. When that pattern has inverted over the past 60 years, a recession has nearly always followed within a year or two. Markets are now just a whisker away from receiving such a signal. Mr. McGugan says most expect the Federal Reserve to boost short-term rates on Dec. 19, which would push that end of the curve even higher and increase the odds of an inversion. Mr. McGugan says many people took the flattening curve as a sign to sell. In Toronto, the S&P/TSX lost 211.39 points, falling to 15,063.59, a 1.38-per-cent decline. Making matters even murkier is that there is no fixed period between an inverted yield curve and the start of a recession. For now, investors are not in a mood to take chances.
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