US stocks fall as recession risk raised

Markets were mixed on Monday.

The S&P 500 fell 1.2 percent, the STOXX Europe 600 fell 0.3 percent but the Shanghai Composite rose 1.5 percent.

The US 10-year Treasury yield fell 9.1 basis points to 1.64 percent, its lowest level since October 2016.

“We think the failed breakout last week for the S&P 500 confirms we are still mired in a cyclical bear market,” said Mike Wilson, Morgan Stanley’s chief US equity strategist, in a note on Monday.

Bank of America raised its estimated chance of a US recession to 1-in-3 in the next 12 months as some of its economic indicators are “flashing yellow”.

However, JP Morgan’s head of global equity strategy Mislav Matejka said that it is too early to expect the next US recession and investors should be optimistic on equities.

“The current macro setup has more similarities to the ’15-’16 mid-cycle correction episode rather than the end of the cycle, in our view,” he said.