On the other hand, the forecasts for an emergency cut in the interest rates of the leading global economy also aroused widespread nervousness in the world's main markets.
A true “Black Monday” is being experienced this August 5th in stock exchanges around the world. Investors in the main markets (Asia, Europe and the United States) are preparing for days of volatility in the midst of a global context disturbed by fears of recession in the United States and a possible lowering of interest rates in the leading global economy by of the Federal Reserve.
While last week was marked by a wave of stock selling on Wall Street, with a cascade of losses in technology stocks, the decline in the global stock market accelerated this Monday.
It should be noted that the CBOE volatility index reached a maximum of 65.73, some 42 points more than at the close of last Friday, while Wall Street opened the week following the wake of a fall in other global stock markets, which at one point caused Japanese stocks will overcome the losses of "Black Monday" of 1987.
The VIX rose 34 points, to 57.15, its highest level since March 2020.
"It looks like a liquidity crisis... this is very, very unusual," said Joe Tigay, portfolio manager at Rational Equity Armor Fund.
The spike in volatility comes after an unusually long period of market calm, in which the S&P 500 went 356 sessions without a downside move of 2% or more, the longest streak since 2007.
"It's been too long a period where stocks were going up and it was assumed that all you had to do was wait and that at some point they would go up," Tigay says. "At some point that goes beyond reality."
At 13:37 GMT, the S&P 500 index lost points, or 3.82%, to 5,142.47 units, while the Nasdaq fell points, or 5.11%, to 15,919.23 units. Meanwhile, the Dow Jones Industrial Average fell points, or 2.96%, to 38,560.92 units.
NOT VERY ENCOURAGING PROJECTIONS
Likewise, stock market traders raised their bets that the Federal Reserve will intervene with an emergency cut in interest rates after the presentation of a labor market report that revealed the worst unemployment rate since 2021 and concern about the generation of jobs. A decision that would occur long before the next Fed meeting, scheduled for September 18.
According to a recent report from Swiss bank Julius Baer, the US labor market continues to cool at a rapid pace suggesting that demand and inflation will moderate as the year progresses. Regarding the planned interest rate cut, it is speculated that the Fed will bet on a decrease of 50 basis points. Along with other weak US economic data, Julius Baer acknowledges that the risk is increasing that the Fed will cut rates more aggressively than had been forecast with gradual cuts.
For experts, what is driving this current nervousness is the growing evidence that the world's largest economy is slowing and that the Fed risks having fallen behind the curve by not yet relaxing monetary policy.
Swap market operators, for example, estimate that the probability of such an adjustment by the Fed is 60% (last week there was only a 0.5% probability).
To date, 10-year Treasury yields are at their lowest level in a year and global bonds trimmed their annual losses, as concerns about the rapidly worsening U.S. economic outlook fueled the demand for fixed income assets.
The turbulence in Japan - where the central bank has begun raising interest rates as the Fed tries to cut them - is also having ripple effects on global markets for various asset classes.
THE COLLAPSE IN STOCK MARKETS
Monday's falls in Asian stock markets resonated around the world. The stock markets of Japan, South Korea and Taiwan, mainly, closed in the red.
The Japanese Nikkei index fell 12.40% at the close of the day, which translates into the second largest drop in the history of this market.
In its worst day since 1987, the Japanese stock market recorded a flight of investors amid a strengthening of the yen after the second increase in interest rates in 2024 by the central bank, a stricter monetary policy and, mainly, concerns of the United States, as some investment firms have pointed out.
The appreciation of the Japanese yen against the dollar and the euro, after a weak Japanese currency had been favorable for the Nikkei during the first half, played against the stock market in that country.
“US employment statistics have further increased uncertainty in the US economy, which, combined with the continued strength of the yen, has caused the market to fall sharply,” said Hideyuki Suzuki, general manager of SBI Securities. , in an interview with Bloomberg .
“At this time, the US Economic Surprise Index is showing a negative trend (getting worse), and investors are becoming increasingly cautious about the deterioration of US economic indicators. Furthermore, the meeting of Jackson Hole will be held this month and the Federal Reserve meeting next month,” said Jumpei Tanaka, strategist at Pictet Asset Management.
For its part, the South Korean stock market fell 8.77% this Monday at market close, also suffering from uncertainty about the United States economy.
And the Taipei Stock Exchange (Taiex), in Taiwan, closed with a drop of 8.35%, marking the largest decline in a single session without precedent.
The Hong Kong stock markets and the Shanghai and Senzhen markets also recorded falls that could deepen in the coming days.
To a lesser extent, the stock markets of Hong Kong (-1.46%), Shanghai (-1.54%) and Shenzhen (-2.08%) also remained in the red.
Latin America has not been indifferent to this trend either. For example, in Chile, the price of the dollar rose dramatically to $965. "With this fear (of an abrupt lowering of the Fed's interest rates), it is possible that the dollar continues until 970 and then seeks 990 For now, these movements in Chile would not give rise to the central bank to intervene, since they are movements that are not attributed to Chile. To see a respite in the peso dollar, copper should rebound, but given the fear of a global crisis. , copper loses US$ 4 per pound and stands at US$ 3.9 dollars, 3.9% on the London Metals Exchange," declared Rodrigo Castillo, general director of BeFX.
THE NASDAQ 100 IS READY FOR FALLS
On the other hand, the Nasdaq 100, the index of technology stocks in the United States, is preparing for its biggest opening drop in more than four years. Big technology companies have lost nearly US$3 trillion in market value in less than a month.
Large-cap technology stocks took the brunt of the selling: chipmaker Nvidia fell more than 7% and Apple fell 8% in pre-market trading on Monday, August 5. Additionally, Berkshire Hathaway reduced its stake in Apple by nearly 50% as part of a sell-off in the second quarter.
Analysts are urging Apple investors to remain calm, despite a delay in the company's much-hyped AI rollout.
CONSEQUENCES IN EUROPE
The European stock markets also reflect the downward trend that is being registered this Monday throughout the world, although the euro continues to appreciate (0.68%) against most of the main currencies.
The EuroStoxx 50, a stock index that groups the 50 largest companies in the Eurozone that are listed in euros, registered a fall of 3.28% at the close of the market and the main stock exchanges of the Old Continent maintain losses of more than 2%, due to fear of investors to the US economy experiencing a “hard landing” and entering a recession.
