Global Stock Markets Tumble Amid Recession Fears and Tech Sector Concerns

From Boom to Doom

Ah, August in the financial markets -- a month that's shaping up to be as pleasant as a root canal. And we're only on the 5th! Investors are acting like they've just discovered their favorite TV show got canceled. Dramatic, irrational, and downright chaotic moves are the order of the day. Welcome to Fifty Shades of Red. This morning, Nasdaq futures are down 6%, the S&P 500 dropped 4.5%, and the Dow is sulking with a 3.1% loss. Japan's Nikkei decided to take a nosedive, falling a staggering 12.4%. The US 10-year bond yield took a 10% hit, and Bitcoin is down 15%. Nvidia, the darling of tech stocks, is down 14% in premarket trading. Investors are on the verge of a collective meltdown. Looking at global indices right now, It's a sea of red...So, what's the deal? Market trends often feel like they're being dictated by a wizard from a fantasy novel -- confusing and unpredictable. Usually, investors have all the information they need to make decisions, but the interplay of risks and opportunities makes investing more of an art than a science. In the past month, especially in the U.S., several forces have been jostling for control, causing a spike in volatility. The VIX index, which measures market volatility, has hit its highest level since March 2023, soaring to around 23 points. It might not sound like much, but in the world of finance, it's like a caffeine overdose. The market has abruptly shifted from a theory of a resilient economy, buoyed by AI innovation and falling interest rates, to a doomsday scenario where the U.S. economy is headed for a recession. Investors are now in full panic mode, selling everything and hoarding ultra-secure bonds. Extreme scenarios dominate when emotions take the wheel. Concluding that the U.S. economy is doomed based on one employment statistic, one weak manufacturing index, and a month's consumer data is like predicting the end of the world because you saw a black cat. Investors are fickle creatures. Just ten days ago, a single Fed rate cut was enough to keep everyone happy. Now, the market is eyeing four rate cuts this year, with the first 50 basis point cut expected in September. Even Elon Musk has joined the chorus, calling the Fed a villain. It's like watching a soap opera. Meanwhile, investors have been selling Japanese stocks like there's no tomorrow. In three weeks, the Nikkei 225 and the TOPIX have lost 20%! The Nikkei 225 alone plunged 12% overnight. The Tokyo Stock Exchange is caught in a perfect storm: profit-taking and a paradigm shift as the Bank of Japan tightens its ultra-loose monetary policy, sending shockwaves through the global bond market and hurting Japanese exporters. Cryptocurrencies are also on a rollercoaster, which can't be good news for Donald Trump, who's been quite fond of them lately. Oil prices are falling due to recession fears, despite tensions in the Middle East. In summary, the market is awash with negative news: fears of a U.S. recession, the Japanese market collapse, and a few additional blows like Nvidia's delayed AI chips and Berkshire Hathaway dumping Apple shares. Even China's attempt to boost its economy with 20 new measures, from employee-free stores to eSports, hasn't done much to lift spirits. With U.S. economic concerns mounting, today's release of the July ISM services index is more crucial than ever. Corporate earnings reports are slowing down this week, but we still have big names like Caterpillar, Amgen, Uber, Costco, Walt Disney, and Eli Lilly to look forward to. Today's economic highlights: The PMI services indices for the major economies are due to be released throughout the day, along with the ISM services index for the United States. The full agenda is here. The dollar is falling to EUR 0.9106 and GBP 0.7838. The ounce of gold is down to USD 2,370. Oil fell, with North Sea Brent at USD 75.54 a barrel and US light crude WTI at USD 71.71. The yield on 10-year US debt falls to 3.69%. Bitcoin is trading at USD 50,400.

MORNING BID AMERICAS-Stocks reel on 'R-word' return, Nikkei dives 12%

A look at the day ahead in U.S. and global markets from Mike Dolan Whether the prospect of a U.S. recession is real or imagined, the mere return of the discussion has been enough to send world stocks and bond yields reeling just as AI doubts and a Japan-led volatility spike have barreled into holiday-thinned August. And like many global selloffs before it, there's the risk of a self-feeding spiral amid a frantic search for "safe" bonds as speculation about hurried and dramatic interest rate cuts mounts. Weekend news that Warren Buffett's Berkshire Hathaway appears to have soured on stocks, letting cash soar to nearly $277 billion and selling about half its stake in Apple , suggests the 93-year-old revered investor has grown wary of the broader U.S. economy and stock market valuations. Shares in both Apple and AI-bellwether Nvidia were down almost 10% ahead of Monday's bell. And as Japanese stocks were one of Buffett's top plays of the past year, that has alarmed an already nervy Tokyo market. After a torrid week last week, Monday saw the most withering stock rout in Japan since the 1987 crash, as the benchmark Nikkei dropped more than 12%. Japan has its own very particular story of course - one of the most favoured stock markets of the past year, but one goosed by a plummeting yen that the authorities have spent several months trying to shore up. And in a classic case of "be careful what you wish for", months of official intervention to buy yen and last week's second Bank of Japan interest rate rise of the year have finally succeeded - but it bowled over the stock market in spectacular fashion in the process. And the yen swings have seeded turbulence around the world. As interest rate "carry trades" funded by cheap yen borrowing were a lucrative bet among speculative funds for the past two years, the sudden yen surge - which hit its best levels of a year on Monday - and the related volatility spike have sent a shockwave through this and other "risk" trades. The anxiety spilled out across world markets again on Monday - with South Korea and Taiwan both down 8% and European benchmarks down more 2%. And it's going to be a rough open on Wall St. With the Nasdaq now already in correction territory after last week's swoon, futures are pointing to further losses of about 4% on Monday and S&P500 futures are down 2.5% ahead of the bell. The VIX "fear index" of U.S. equity volatility soared - topping 40 for the first time since the 2020 pandemic lockdowns. A reflection of a reversal of risky bets, Bitcoin plunged 15% from Friday's levels, the Swiss franc surged to its best level of the year - but gold fell, curiously. U.S. stocks' eye-watering retreat last week came in the thick of a noisy and somewhat disappointing Big Tech earnings season, with fears about an overspend in artificial intelligence and the lack of an end result yet gnawing at investors. But the return of U.S. recession worries to a market overwhelmingly priced for a "soft landing" of the economy was the biggest game changer - following a series of weak manufacturing and labor market updates. If past precedents on the pace at which the U.S. jobless rate is rising are applicable - and many think persistent post-pandemic labor market distortions mean they are not - then a triggering of the so-called "Sahm rule" recession flag on Friday was a moment. Even though the rule's author, former Federal Reserve economist Claudia Sahm, played down the warning this time around, the calculus of a half-point rise in the three-month average jobless rate above the low of the past year stands as a warning nonetheless. So much so, interest rate markets have scrambled. Fed futures markets now see a half-point cut in Fed rates as soon as next month and as much as 125 basis points of cuts by yearend. JPMorgan Now expects the Fed to cut rates by 50 bps at both September and November meetings, followed by 25-bps cuts at every meeting thereafter. With U.S. 3-, 10- and 30-year auctions this week, Treasury yields and the dollar have plummeted. Ten-year U.S. yields fell below 3.7% for the first time in more than a year, and have tumbled about 50bps this month already. Two-year yields fell as low as 3.69% and the two-to-10-yield curve steepened to within a whisker of positive territory for the first time in over two years - seen by some as a warning sign of recession ahead after two years of inversion. Riffing over pumped-up Fed easing talk, the dollar index touched its lowest since March. Critical now will be readings from the U.S. service sector later today, a reality check from Fed speakers and also the release of the Fed's quarterly senior loan officer survey. Key developments that should provide more direction to U.S. markets later on Monday: * U.S. July service sector surveys from ISM and S&P Global. Fed's quarterly senior loan officer survey * San Francisco Federal Reserve President Mary Daly speaks * U.S. corporate earnings: Tyson Foods, CSX, ONEOK, Diamondback Energy, Realty Income, Simon Property, Williams * U.S. Treasury sells 3-, 6-month bills (By Mike Dolan, editing by Mark Heinrich [email protected])

MARKETS IN FOCUS/Bourses in sell-off: Concerns about US economy

FRANKFURT/NEW YORK/TOKYO (dpa-AFX) - Investors' nerves are on edge at the start of the week on stock markets around the world. Friday's price slide continued seamlessly on Monday. An unexpectedly weak US labor market report before the weekend had fueled fears of a recession in the USA and, as a result, a more significant cooling of the global economy, sending stock markets on a downward spiral. Market participants believe it is possible that the US Federal Reserve missed the opportunity to cut interest rates at the right time and cut them too late. Bad economic news - which was seen as positive some time ago because it raised hopes of interest rate cuts - is now also perceived as bad news because it fuels fears of recession. Geopolitically, the situation remains very tense with a possible attack by Iran on Israel. The weak data from the US jobs market was recently compounded by largely disappointing quarterly figures from the hot US technology sector. The hype surrounding the trending topic of artificial intelligence (AI) may have gone too far, according to traders. On the Asian stock markets, technology stocks suffered on Monday due to a report that chip manufacturer Nvidia is postponing the launch of new AI chips due to so-called design flaws. As a major beneficiary of the artificial intelligence boom, Nvidia has recently been the driving force behind the general stock market rally. "Investors are currently being confronted with two unpleasant facts," wrote analyst Jochen Stanzl from trading firm CMC Markets. "On the one hand, growth in the field of artificial intelligence comes with enormous costs, which reduces margins and makes high share valuations suddenly appear exaggerated. And secondly, the restrictive monetary policy of the European Central Bank and the Federal Reserve is now having an effect." In Europe, share prices took a dive on Monday morning. Germany's leading index, the Dax, lost around three percent at one point and trended towards the 17,000-point mark. The EuroStoxx 50, the leading index in the eurozone, suffered similar losses. In the USA, futures on the Nasdaq 100 technology index again indicated high losses of around four percent on Monday. The extent to which uncertainty is spreading in New York can be seen from the VIX fear barometer. This measures the intensity of fluctuations on the stock markets and reached a high on Monday since mid-2020. The price losses in Europe were almost mild compared to the Japanese Nikkei 225, which suffered a price slump of more than 12% on Monday. Because the Tokyo benchmark index has now lost more than 20 percent from the record high reached in July, Borsians are talking about a so-called bear market. This means that pessimism prevails on the stock market, which is characterized by falling prices. The recent sharp rise in the national currency, the yen, is weighing heavily on the share prices of export-dependent Japanese companies. Unlike in Europe and the USA, interest rate cuts are not an issue in Japan. Rather, the Japanese central bank could raise interest rates. Market expert Daniel Saurenz from the investment portal Feingold Research explained the sell-off as follows: "The international stock markets now have to price in the risk of a recession. "The Dax, Nasdaq and Nikkei were still trading at record levels a few weeks ago and the Japanese are showing how quickly a party can end." It was a black Monday in Tokyo today, while the stock market in Frankfurt was still wearing shades of gray, said Saurenz, referring to the varying degrees of price losses. The fact that investors on both sides of the Atlantic are avoiding risky investments at the start of the week is also evident when looking at cryptocurrencies, which are considered highly speculative. Bitcoin continued to lose considerable ground. The price of the oldest and best-known cryptocurrency plummeted to below USD 50,000 on the Bitstamp trading platform, reaching its lowest level since February. In addition to Bitcoin, other cryptocurrencies also came under heavy selling pressure. Meanwhile, currencies regarded as safe havens, such as the Japanese yen and the Swiss franc, benefited from the great uncertainty on the financial markets. The dollar fell to 0.8448 Swiss francs. This is the lowest level since January. Government bonds, such as those from Germany, which are considered safe, also remained in demand. Futures for 10-year German and US bonds rose and yields fell. The crisis currency gold remained at around USD 2,422 per troy ounce (around 31.1 grams) on Monday. In mid-July, the price of gold had reached a record high of 2,483 dollars./ajx/la/bek/men