U.S. PMI drops to lowest level in almost a decade
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The U.S. Manufacturing Purchasing Managers' Index fell by more than two points to 50.5 in May, the lowest level since the 2009 global financial crisis, according to IHS Markit.
A reading above 50 indicates expansion within the sector, while anything below 50 indicates contraction. 
Manufactures signaled the first decline in new orders since August 2009.
"New orders are falling at a rate not seen since 2009, causing increasing numbers of firms to cut production and employment," said Chris Williamson, Chief Business Economist at IHS Markit. "Production is set to act as a further drag on GDP, with factory payroll numbers likewise in decline," he added.
Weak demand conditions and ongoing trade tensions led firms to express the joint-lowest degree of confidence regarding future output growth since IHS survey series began in April 2012.
The May survey showed that some firms noted that customers were postponing orders due to growing uncertainty about the outlook.
Recession fears
Markets appeared to price in higher chances of a recession and rate cuts by the U.S. Federal Reserve and other central banks. Yields on the 10-year Treasury hit 2.071 percent, their lowest levels in more than 1-1/2 years, while traders pushed short-term interest rates futures to levels implying the Fed could begin cutting rates as soon as next month.
"There was a big change in the bond market," Cornerstone Macro LLC researcher Roberto Perli wrote in a note. "We don't like to utter the word 'recession' lightly, but the bond market reaction on Friday in response to the Mexico tariff news was ominous."
"The additional shock from the escalated trade tensions is not going to be good for global trade. In terms of the monetary policy response, almost everywhere the race is going to be to the downside," said Aidan Yao, senior emerging markets economist at AXA Investment Managers.
(With input from Reuters)