Many assets have seen significant price drops today, however the commodity sell-off is eye-catching. It is difficult to find a market that would not experience significant losses today (only the prices of gold and silver are moderately declining). Strong drops in oil and agricultural commodity prices are caused by rallying USD nad recession fears. Bond market also experienced significant movements. The US yield curve continues to reverse. The difference between 10 and 2-year bonds reached even -12 basis points. This is more than it was in April this year and in 2019 (in 2020 the difference was short-lived and we had a recession!). Obviously, the signal of an impending recession is stronger if the curve remains negative for an extended period of time. We'll see how it will be this time.

The curve has dropped significantly below zero, although it has not yet reached lows from 2007 or 2000. Source: Bloomberg
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Recession signals are strong and GDPNow model continues to point to reading below zero for Q2. The model has been revised upwards slightly but still points to -1.1% decline in Q2. The first forecasts on Bloomberg appear ahead of the Q2 GDP reading on July 27. Deutsche Bank points to a reading of -0.5% at an annualized rate. Source: Fed Atlanta

Brent crude oil drops below $ 100 a barrel. The downward wave in July is even stronger than in June. The situation is starting to resemble what happened in 2008, or at least in 2018. The very tight market suggests rather similar moves to 2018, when prices fell over 40% before the rebound began. It is worth remembering that in 2018 central banks increased monetary easing (the Fed stopped interest rate hikes and then started to lower rates). Source: xStation5
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