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Markets update: Weak U.S. manufacturing data sparked a global market sell-off Friday, with Asian equities plunging, Treasury yields plummeting, and safe-haven assets surging. Japan's Nikkei plummeted, fueled by yen strength and interest rate uncertainty. Fears of a U.S. recession drove investors into bonds and currencies, overshadowing recent rate hikes. Upcoming U.S. employment data will be crucial.
Economic Calendar
Global Markets Roundup: 2 August 2024
On Friday, Asian markets and U.S. Treasury yields saw a significant downturn due to disappointing U.S. manufacturing data, sparking concerns about a possible economic slowdown. Conversely, safe-haven currencies such as the Swiss franc and yen saw increased strength. Japan's Nikkei index NI225 experienced its most substantial decline in over four years, influenced by a stronger yen and uncertainties surrounding domestic interest rate adjustments. The market reacted to losses on Wall Street and a general aversion to risk following the Bank of Japan's recent interest rate hike, the first in 15 years, along with decreased bond acquisitions.
The U.S. manufacturing sector displayed signs of fragility, with activity hitting an eight-month low in July and a notable surge in new unemployment claims, reaching an 11-month peak. These developments, combined with a discouraging ISM manufacturing report, prompted investors to adopt a risk-averse approach, despite indications from the Federal Reserve about a potential rate reduction in September. Market sentiment was further subdued by geopolitical tensions. The Israeli military's announcement of the death of Hamas' military leader Mohammed Deif in Gaza last month on Thursday, followed by the assassination of the group's political leader Ismail Haniyeh in Tehran, increased investor wariness.
The MSCI Asia-Pacific index (.MIAPJ0000PUS) experienced a 0.8% decline in early trading, reflecting a significant downturn in the U.S. market. Concurrently, U.S. stock futures displayed continued negative movement, with Nasdaq futures NQ1! dropping by 1.5% and S&P 500 futures ES1! down by 0.9%. Similarly, EUROSTOXX 50 futures FESX1! saw a decrease of 0.9%, while FTSE futures Z1! slipped by 0.12%. Japan's Nikkei index NI225 experienced a significant decline of over 5%, falling below the 37,000 mark for the first time since April. This drop of 4.89% marked the index's most substantial daily decrease since March 2020.
Concurrently in the currency markets, the yen USDJPY maintained stability at 149.65 per dollar, nearing a four-month peak and showing potential for a weekly increase of 2.8% due to safe-haven investments. Similarly, the Swiss franc USDCHF exhibited strength, achieving its highest value since early February at 0.8720 per dollar. In contrast, the British pound GBPUSD experienced a slight decline of 0.09% to $1.2723 subsequent to the Bank of England's recent decision to reduce interest rates from a 16-year high set on Thursday. The EURUSD remained unchanged at $1.0793, having dropped to a three-week low of $1.07775 overnight. The AUDUSD was trading at $0.6501, dropping 0.5% from the previous day and hovering slightly above a three-month low of $0.6480 reached on Wednesday. Further support can be expected around $0.6466, while resistance is seen at $0.6580.
Amid concerns raised by investors regarding a potential economic downturn in the United States, the 10-year Treasury yield (US10Y) reached a six-month low of 3.9440% due to an increased demand for secure government bonds. Concurrently, the two-year yield (US2YT=RR), which typically serves as an indicator of short-term interest rate projections, declined to its lowest point since May 2023, settling at 4.1338% after briefly touching 4.1090%. Current insights gleaned from futures markets indicate a probability of approximately 29% for a 50-basis-point interest rate reduction by the Federal Reserve in September, as per FEDWATCH data.
The forthcoming U.S. non-farm payrolls report is currently under intense scrutiny as it is expected to provide further insights into the status of the labor market and the broader economy. Analysts have advised that a negative outcome in the U.S. employment figures could exacerbate concerns and raise the possibility of immediate interest rate cuts, given the prevailing market sentiment that adverse news could have a detrimental impact on risk assets.
In the commodities market, oil prices experienced a slight increase on Friday, although they remained on course for a fourth consecutive weekly decline. Apprehensions regarding global fuel demand took precedence over worries about potential supply disruptions in the Middle East. Brent crude BRN1! edged up by 0.5% to reach $79.92 per barrel, while U.S. crude CL1! saw a 0.54% uptick to $76.72 per barrel. Furthermore, GOLD gained strength, advancing by 0.45% to $2,456.19 per ounce.
Upcoming, markets are expecting Industrial Production and Retail Sales data from Italy, as well as the US Non-Farm Payrolls, Unemployment Rate, and Factory Orders.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team
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