Bond yields near record lows, shares struggle on darkening global outlook

Global bond yields flirted with record low levels while stocks struggled to recover on Thursday as economic turbulence from intensifying US-China frictions and the spectre of a no-deal Brexit drove investors to safer harbors.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat in early trade while Japan's Nikkei rose 0.14 percent.

On Wall Street, the S&P 500 gained 0.65 percent, due in part to gains in energy sector following a rebound in oil prices.

Sharp falls in U.S. Treasury yields also meant equities might be attractive for some investors even though traders in stocks globally have bailed out in droves in the past several months due to recession worries.

Bond markets around the world painted a gloomier picture, with yields on 30-year U.S. Treasuries and 10-year German bunds yield both hitting record lows - 1.905 percent and minus 0.716 percent on Wednesday. Inversion remains a prominent feature across the U.S. yield curve, where short-dated yields are running above long-dated ones, which has also unsettled investors. Yield curve inversion often precedes a recession.

The Italian 10-year bond yield briefly fell below one percent for the first time ever. The rush to buy Italian debt, which carries higher yields than the 'core' euro zone countries, was prompted by growing hopes that a new government will soon be formed in Rome and a new election averted.

In Asia, the 10-year Japanese government bond yields stood at minus 0.280 percent, just above its record low of minus 0.300 touched in 2016.

"Falls in global bond yields reflect growing concerns that long-term global growth are slowing down on U.S.-China tensions and subsequent global supply chain disruptions," said Tomoo Kinoshita, global market strategist at Invesco Asset Management in Tokyo.

"Stock markets on the other hand are supported in the near-term by hopes of more stimulus, notably from the Federal Reserve and the European Central Bank," he said.

The two major central banks are expected to cut rates next month, while many investors believe the Bank of Japan could join the fray if market sentiment weakens further.

The Trump administration on Wednesday made official its extra 5 percent tariff on $300 billion in Chinese imports and set collection dates of Sept. 1 and Dec. 15.

That means products such as smartwatches, Bluetooth headphones, flat panel televisions and many types of footwear will be levied from next month, raising worries about U.S. consumption, one of the few remaining bright spots in the world economy.