Global Market Report:
📉 Since last Friday, and with Monday’s falls, a new debate is opening up: Is an urgent rate cut by the Fed necessary? Speculation is beginning to mount that the Fed may have to cut rates even before the scheduled meetings. The reasons, as we have explained in previous reports, are that macroeconomic data that was expected to come out weak, may be weakening too fast, signalling an impending recession. Finding the balance between maintaining inflation free growth and avoiding a sudden recession does not seem to be an easy task for the Fed.
❓ The question on everyone’s mind today is whether yesterday’s sell-off is the end of the declines we started to see last week or the start of a larger correction? Key assumptions that had underpinned gains like an unstoppable US economy and rapid AI revolution look naïve after recent evidence. The selloff was triggered by factors including yen gains, big tech earnings disappointments, and weak US jobs/GDP data fueling recession fears.
💼 Investors looked for bargains following the sharp market selloff seen on Monday. Buying the S&P 500 after a 5% decline has often proved profitable historically over the past four decades, according to Goldman Sachs analysts. Some calm was returning to markets, with many investors saying there’s no reason to fear an imminent US recession based on the recent volatility and declines. What matters is whether Monday’s erratic trading signals the end of a worldwide selloff that began to intensify last week or the start of a sustained decline.
📈 Leading advances in Asia, Japanese stocks have surged higher, recovering some of the losses from Monday’s worldwide sell-off.
Related Markets:
📈 US bond yields have risen, returning to levels closer to 4%, showing falling demand for bonds, and hence less panic in equities.
📉 The SP500 futures have tried a bullish rebound which has reached 5300 points, but at the moment they are falling back to below 5250 points. Unfortunately, this seems to affect all sectors of the American market, the redistribution of capital no longer serves as an excuse to justify the falls in the technology sector, as the rest of the sectors closed in negative yesterday, and the Russell 2000 fails to recover the levels achieved at the end of July, falling again to areas close to 2000 points.
📉 In Europe, the Dax 40, which was also attempting a bullish rebound towards 17,600 points, has turned around and is currently losing 17,300 points.
💵 The dollar, surprisingly, recovers some strength, rising above 103 points on the DXY index. The EURUSD falls again to areas close to 1.09 after having touched 1.10.
🏅 Gold seems to be trying to consolidate above 2400 $, which would indicate that the supermarket risks are still latent. Let’s not forget that everything points to a strong Iranian attack against Israel in the next hours or days, which could generate many more complications. However, the black gold, oil, remains relatively weak, with Brent Crude currently trading at $76 per barrel. Yesterday, we learned that production was suspended at one of Libya’s largest oil wells; however, fears that the US is experiencing a faster than expected economic recession could keep demand for crude oil weak and cautious.
🌍 Geopolitics:
💼 Several US Attorneys contacted Janet Yellen after the US Treasury asked banks to search for transactions with keywords such as “Trump”. They reminded the US Treasury that laws such as HB 989 are intended to protect consumers from discrimination based on political/religious views or arbitrary “social credit scores” of ideological agendas.
📱 Chinese tech giants such as Huawei and Baidu, as well as start-ups, are stockpiling Samsung’s high-bandwidth memory (HBM) chips in anticipation of US export curbs on the chips to China.
⚠️ Tensions between Israel and Iran continue to escalate. Yesterday Iran declared NOAM, Notice of Air Mission, closing airspace in some of its regions, in anticipation of missile launches, perhaps. The US continues to build up its forces around Israel, and Blinken warned yesterday that any attack on Israel will receive an immediate response. With little knowledge of Israel’s nuclear doctrine and escalating violence, there is great concern about where the crisis could lead without de-escalation. Experts estimate that Israel has some 90 plutonium warheads that can be launched from missiles, submarines and aircraft, but details of its posture are opaque. Israel would be the only country in the world with nuclear weapons not subject to inspections by international bodies such as the UN.
