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Markets Update: Investors will closely monitor the forthcoming ISM non-manufacturing survey, which is expected to indicate a rebound in employment. Noteworthy corporate earnings, including those from Caterpillar, Walt Disney, and Eli Lilly, will also offer insights into the economic landscape. Amidst this turbulence, the narrative of an impending recession and the potential for aggressive rate cuts are likely to dominate market sentiment in the weeks ahead.
Economic Calendar
Global Markets Roundup: 5 August 2024
On Monday, stock markets experienced a significant sell-off, highlighted by Japan's Nikkei NI225 plummeting by a remarkable 13%—marking its most severe decline since the 2011 global financial crisis. This downturn was instigated by mounting apprehensions that the United States might be edging towards a recession, prompting investors to retreat from high-risk assets and anticipate swift interest rate reductions to spur economic growth.
Key Market Developments:
- Nikkei NI225: Recorded a 13% decrease, hitting a seven-month low.
- Nasdaq Futures NQ1! : Slid by 3.7%.
- S&P 500 Futures ES1!: Declined by 3.15%.
- EUROSTOXX 50 Futures FESX1!: Fell by 2.45%.
- FTSE Futures Z1!: Decreased by 1.42%.
As a result of this significant sell-off, safe-haven currencies experienced a surge, with the Japanese yen and Swiss franc notably strengthening as investors unwound carry trades. The bond market witnessed heightened demand for secure investments, leading to a decrease in yields. Japanese 10-year bond yields declined by 17 basis points to 0.785%, while U.S. Treasury yields also saw a decrease. The 10-year U.S. Treasury note's yield dropped to 3.723%, the lowest since mid-2023. The two-year Treasury yield fell to 3.807%, potentially signaling an inverted yield curve—a precursor to a recession.
Central Bank Forecasts:
Market participants are now anticipating a 50-basis-point rate cut by the Federal Reserve in September, with the possibility of further reductions as early as November. Futures markets are pricing in a total of 122 basis points in cuts to the federal funds rate this year, potentially reaching 3.0% by the end of 2025. Analysts at Goldman Sachs and JPMorgan have raised their recession probabilities to 25% and 50%, respectively. Both institutions foresee substantial rate cuts, with Goldman expecting quarter-point reductions at the next three meetings and JPMorgan advocating for a 50-basis-point cut as soon as September.
Commodity and Currency Markets:
In the commodities sector, GOLD experienced an influx of safe-haven demand, rising to $2,456 per ounce. Oil prices displayed volatility, initially buoyed by tensions in the Middle East but ultimately pressured by global demand uncertainties. Brent crude BRN1! dropped to $76.68 per barrel, while U.S. crude CL1! declined to $73.30.
The dollar index DXY weakened, reflecting a shift in interest rate expectations concerning the U.S. The euro maintained stability against the dollar at $1.0934 EURUSD but saw a significant decline against the yen, falling by 1.9% to 156.35 EURJPY. The yen's appreciation against the dollar was particularly noteworthy, rising by 2.2% and pushing the exchange rate to 143.10 USDJPY. Concurrently, the Swiss franc reached a six-month high, with the dollar dropping to 0.8485 USDCHF
Looking forward, today's market outlook includes the anticipated release of the Germany and EU HCOB Services PMI, UK S&P Global Services PMI, and US ISM Services PMI.
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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