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(Today's word count is 990, or ~4 minutes.)
Illustration: Lazaro Gamio/Axios
The Dow's 800-point fall grabbed headlines, but the real warning about the global economy's dire health comes from Europe. The German economy shrank in the second quarter, showing negative growth for the second time in 4 quarters.
Why it matters: Germany is being decimated by the global downturn in manufacturing and trade that has weighed extensively on major exporting countries. The downturn is likely coming for other economies as well, experts say.
The big picture: Germany is the largest economy in Europe and the growth engine of the broader eurozone economy. As such, it was not the only economy to show its suffering Wednesday.
Be smart: In a global economy, “U.S. economic developments affect the rest of the world, and the reverse is also true,” Fed Chair Jerome Powell said last month.
Yes, but: Seema Shah, chief strategist at Principal Global Investors, predicts the downturn could be delayed until 2021.
Where it stands: The 2 levers that have saved the economy in previous times of crisis look exhausted.
The 10-year German government bond yield dipped to -0.656%, a fresh record low that takes its fall this year to more than 90 basis points.
Why it matters: This is not how bonds are supposed to work.
What to watch: The ECB is widely expected to cut rates this year, potentially driving German bonds even further negative. German Chancellor Angela Merkel has so far refused calls to increase government spending to offset the economic downturn.
Axios' Courtenay Brown writes: The Dow Jones Industrial Average fell 800 points — or 3.05% — on Wednesday, after the bond market flashed a warning sign that's predated every recession for the past 50 years.
Why it matters: It was the market's worst day of 2019. The selloff reconciled what have so far been conflicting sentiments between the bond and stock market.
By the numbers:
Of note: As the market slumped, President Trump blamed the Federal Reserve for raising interest rates "too much and too fast" in a series of tweets, calling the inverted yield curve "crazy."
Investors were nervous about a recession before Wednesday's selloff.
Details: A third of fund managers polled in the latest Bank of America Merrill Lynch survey said a recession is likely to happen in the next 12 months, the highest recession probability since October 2011.
What's happening: Trade war concerns (51%) were the top risk cited by fund managers surveyed, followed by "monetary policy impotence," which remained in the second spot at 15%. A China slowdown and a bond market bubble round out the top 4, each at 9%.
Yields around the globe have fallen to record lows, with nearly a quarter of all government bonds holding negative interest rates.
The intrigue: Former Federal Reserve Chair Alan Greenspan even said Tuesday he wouldn’t be surprised to see more U.S. bond yields turn negative.