Introduction: Market trend resumes as Asia-Pacific markets slide
Hello, and welcome to our coverage of business, financial markets and the global economy.
Global investors are looking for uncertainty after last week’s losses, as concerns about the health of the US economy gripped markets.
Stocks fell again in Tokyo today, where Japan is located Nikkei 225 The share index is down about 10% in recent trading – its lowest level since the end of last year, and is causing circuits designed to stop panic selling.
Asian markets are still buying this morning. It will be a busy day today. $COSPI suspended in a circuit breaker, $NIKKEI down ~10%
– Intern Pierre (@internpierre) August 5, 2024
Other Asia-Pacific markets are also falling, including South Korea Kospi down more than 8% in the afternoon trade, and in Australia S&P/ASX 200 down 3.5%. Further losses are expected in Europe and Wall Street today.
Risk appetite has waned, after the technology-focused Nasdaq index entered contract territory on Friday – closing more than 10% below its all-time high.
Disappointing US jobs data on Friday added to concerns that the US Federal Reserve may have made a mistake by not cutting interest rates last week, and it may be too late to prevent a recession. The likelihood of a significant reduction in borrowing costs next week has increased.
The market’s probability of a 50-point cut by the Federal Reserve in September suddenly rose from de minimis to 80% as traders increased their expectations for the size and pace of the rate-cutting cycle. Fed.
It is certainly possible that, …— Mohamed A. El-Erian (@elerianm) August 4, 2024
Last week’s selloff came amid a series of significant events, including:
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The Bank of Japan dramatically raised interest rates, sending the yen higher.
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The weak US ISM manufacturing report, which showed factory activity contracted last month
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The increase in the number of Americans filing new claims for unemployment benefits, to an 11-month high, was followed by….
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…a decline in job creation, according to July non-farm payrolls
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Weak financial results from large technology companies, which did not persuade Wall Street that large investments in artificial intelligence pay off.
Last week’s news that Warren Buffett had reduced his stake in Apple may weigh on tech stocks again this week.
Escalating tensions in the Middle East hit the market yesterday, as fears grew of a retaliatory attack by Iran on Israel. Saudi Arabia’s benchmark index fell 2.4% on Sunday, and Egypt’s blue-chip index lost 2.9%.
There is certainly a lot of fear in this system, as shown by the “fear gauge” of Wall Street – the Vix index of expected turmoil in the US stock market – which rose last week.
Like Stephen Innespartner manager to SPI A treasure Administrationputs:
It’s a bit like watching a slow-motion spill in a crowded market: you know there’s room for chaos, but you’re not sure how long the aisles will last. before everything is down.
How did the financial snowball begin to fall? It started when the Yen was rising – the move we talked about before the Bank of Japan (BOJ) decided to hike. This beefier yen produced a strong effect, which led to a global complacency in auto trading that sent the VIX into action. Ah, the VIX, our merciless watchdog, is always ready to sound the alarm.
From there, the market turmoil turned into a strong rally, driven by two vector bear attacks. And if you add in the ridiculous high-tech earnings that fail to add up — well, that’s the third thing. Everything compounded, turning a manageable situation into a massive slide down the financial slopes.
Today we will get a lot of data from the services sector, which will show how the UK, eurozone and US economies are progressing.
Program
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7am BST: Russian service sector PMI for July
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9am BST: Eurozone services sector PMI for July
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9.30am BST: UK services sector PMI for July
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3pm BST: US services sector PMI for July
Important events
After an hour’s trading, the UK market is deeper than red.
The FTSE 100 index of the largest companies listed in London has now fallen below 8,000 points for the first time since April.
It fell 190 points, or 2.3%, to 7,984 points – on track for its worst day since last October.
Only two companies are still trying to sell – Haleon (manufacturer of toothpaste, vitamins and pain relief) and BAE Systems (manufacturer of warplanes, warships and warships). Both are up about 0.9%.
US futures suggest markets could fall further before finding a support level, warns Derren Nathan, head of equity research at Hargreaves Lansdowne:
He adds:
The coming months will be a testing period with economic and political uncertainty in the markets, as the US heads towards increasingly unpredictable elections.
Investors are betting on a UK interest rate cut
City investors have been cutting prices more than UK interest rates this year.
Interest rate futures are now fully bearish with the BoE’s two-quarter rate cut at the December meeting.
By the end of last week, only one had been cut in detail the price before the end of 2024 (although it was already seen that the second decrease is possible).
Back in London, stocks with some exposure to the US are high on the FTSE 100 losers’ board, says Interactive Investor’s Richard Hunter.
Pershing Square, a hedge fund management company, fell 7.2% while Scottish Mortgage fell 5.5%.
Hunter said “waves of global uncertainty” led to a heavy open for the London market this morning, with the Footsie down 2%.
US stock futures indicate we will see more losses on Wall Street when trading opens in New York in less than six hours.
CNBC has the following information:
Dow Jones Industrial Average futures were down about 600 points, or 1.5%. S&P 500 futures and Nasdaq-100 futures fell 2.8% and 4.9%, respectively.
A potential recession in the US could have a worrisome effect on the UK economy as UK growth is closely linked to US growth.
Professor Costas Milasof the School of Management University of Liverpoolexplains:
Goldman Sachs thinks there is a 25% risk of a US recession but even a very weak US growth will have the same problems. In fact, my new research (co-authored) that was recently published by The Journal of International Money and Finance argues that weak growth in the US will have a negative impact on UK economic growth and, therefore, make the UK less attractive for foreign direct investment (FDI).
This should worry Rachel Reeves and Andrew Bailey: FDI inflows to the UK have been falling steadily post-Brexit which explains, in part, our poor productivity performance (as higher FDI inflows boost productivity at home) and thus undermines the chancellor’s plans to fix us. public funds.
For the BoE, these are also worrying times: I fear the MPC will have to consider cutting interest rates as soon as November, if not earlier…
Following the reduction in UK interest rates last week, to 5%, the money market shows a 45% chance that rates will be cut again in September.
The index of European technology products also fell, falling 5.1% to the lowest level since January.
European bank shares slide
European bank stocks are being hit hard this morning, pushing Stoxx Europe 600 Banks Index fell 4.6% in early trade, the lowest since March.
Developed in: Italy, Unicredit decreased by about 7% and Understanding St. Paul down 6.5%.
Germany German Bank down 5.7%
Stock markets around the world have reached Europe.
Germany DAX down 1% in early trading in France CAC shed 2.1% and that of Spain IBEX down 2.8%.
⚠️ EUROPE’S STOXX 600 TOWN 1.8%
**BRITAIN 100 TOWN FTSE 1.7%
**FRANCE CAC 40 UNDER 2.1%; SPAIN’S IBEX DOWN 2.8%
**EURO STOXX INDEX DOWN 1.5%; EURO ZONE BLUE CHIPS DOWN 1.3%
– PiQ (@PiQSuite) August 5, 2024
Almost a hundred companies in the FTSE 100 index are falling, only the top five in the first trade.
A few that are rising are ‘protected’ stocks – such as consumer goods manufacturers Haleon (+1.2%), Unilever (+0.9%) and Reckitt Benckiser (+0.7%).
The London market is falling
The London market is down in early trading in the City.
The FTSE 100 index of blue-chip shares fell 163 points, or 2%, to 8011 points, the lowest level since April.
Rolls-RoyceThe UK engineering firm was the top faller in the FTSE 100, down 7.3%, followed by Barclays (-5.6%).
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