Risk of recession “greater than ever” but rate cuts could save markets

Markets were mixed on Thursday.

The S&P 500 rose 0.2 percent but the STOXX Europe 600 fell 0.3 percent.

Earlier in Asia, the Shanghai Composite rose 0.2 percent but the Nikkei 225 fell 1.2 percent.

The US 10-year Treasury yield fell 6.2 basis points to 1.534 percent, its lowest since August 2016.

US economic data on Thursday were mixed. Retail sales rose 0.7 percent in July but industrial production fell 0.2 percent.

China on Thursday threatened to take “necessary countermeasures” against planned additional US tariffs against its imports.

“Tariff escalation risks continue to aggravate the current weakness in global manufacturing, with risk now threatening to infiltrate the resilient service sector and labor market,” wrote Darrell Cronk, chief investment officer for wealth and investment management at Wells Fargo.

Kathy Lien, managing director of FX strategy at BK Asset Management, said that “the risk of recession this cycle is greater than its ever been”.

Still, Mark Mobius thinks that central banks will save markets by cutting interest rates.

“Everyone seems to be racing to the bottom. Which is actually going to result in the market doing very well,” he told MarketWatch on Thursday.