Danske Bank analysts note that the US treasury curve 2-10y continued to flatten yesterday and is now just 11.5bp from inverting, which historically has been a reliable indicator of a forthcoming recession in the US.

“The flattening gained momentum after Fed's Bullard - normally one of the most dovish members of the Fed - said that the Fed has already reacted to trade uncertainty and that the Fed should not react to short-term stock moves and day-to-day trade negotiations. The latter should not surprise anyone, but it still underlines that if some investors thought that Powell would issue a 'Powell put' they might be wrong. That said, Bullard did underline that he would not rule out further policy changes ahead and that trade uncertainties would chill global investments and growth. However, all in all Bullard came across relatively 'hawkish' given his dovish reputation. Despite the 'hawkish' comments from Bullard and the flattening of the yield curve we did see a stabilisation in the US equity market with major indices rising up to 1%.”