The NYSE collapsed on Monday amid a panic movement. The index Dow Jonesin its worst day since 2022, fell 2.60% to 38,703.27 points. The Nasdaq Technologyat its lowest since May, lost 3.43% to 16,200.08 units, while the S&P 500 fell 3% to 5,186.33 points. All 30 stocks that make up the Dow Jones ended in the red, as did all 11 sectors of the S&P 500.
The weakness of the labor market in July in the United States “signals that the Federal Reserve (Fed) waited too long to lower its interest rates,” said Pantheon Macroeconomics, which noted that the employment data published on Friday, the main trigger of the wave of sales, came two days after the entity decided to keep its reference interest rates unchanged.
The Fed has kept its interest rates at levels not seen in more than two decades, between 5.25% and 5.50%. It raised them to cool the economy in the face of high inflation. High interest rates make credit more expensive and discourage consumption and investment, thus reducing pressure on prices.
Japan’s Nikkei 225 plunged after Friday’s decline
The yen and the Swiss francconsidered safe havens, rose as carry trades unraveled, sparking speculation that some investors were liquidating profitable trades to raise money to cover losses elsewhere. Such was the torrent of selling that circuit breakers were triggered in stock markets across the world. Asia.
Tokyo collapsed. The Nikkei 225its main index, which had already fallen 5.8% on Friday, lost 12.4%, or 4,451.28 points, on Monday to close at 31,458.42 points, breaking its record losses, which dated back to the stock market crash of October 1987. The Topix indexThe broader index fell 12.23% to 2,227.15 points.
Taiwan fell by more than 8% and Seoul more than 9%. Chinese stock markets fell more moderately: the Hang Seng Index of Hong Kong fell 2.13% in recent trading. The composite index of Shanghai fell by 1.54% and that of Shenzhen 1.85%.
“The immediate trigger for this risk aversion appears to be the unexpected rise in interest rates” announced on Wednesday by the Bank of Japan (Boj), according to Dilin Wu, a strategist at Pepperstone.
This monetary tightening after years of negative rates, combined with a slowdown of economic activity in USAprecipitated the rise of the yen, which was also supported by the interventions of the Japanese central bank in the foreign exchange market.
The Japanese currency, which was trading at almost 162 yen per dollar in July, rebounded on Monday to 141.73 yen per greenback, a level not seen since early January, from 146.52 yen recorded on Friday in NYA stronger yen is a negative factor for Japanese exporters.
On the foreign exchange market, the dollar fell 2.17% to 143.35 yen on Monday, and the euro fell 1.99% to 156.72 yen. While the bitcoin fell 6.57% in the last 24 hours to $54,745.
Losses spread to European stock markets
In Europethe main stock markets opened lower, mainly weighed down by banking and technology stocks, following the falls recorded hours earlier in Asia. The pan-European index STOXX 600 fell 2.6% to 487.15 points, its lowest level since February 13.
Frankfurt lost more than 3% shortly after opening, Paris fell 2.6% and London 23%. Madrid fell by 2.8% and Milan plummeted by 4%.
“The trigger: a US jobs report” released on Friday, which sent “stocks and bond yields” tumbling Wall Streetexplained Stephen Innes, an analyst at SPI Asset Management.
The rate of unemployment in USA rose in July more than expected, to 4.3%. This is the highest unemployment rate in the country since October 2021.
The Federal Reserve’s delay is at the center of the debate
Following this publication, the public debt yields fell hard, which suggests that the Federal Reserve United States (Fed) could cut its rates more dramatically than expected.
If the Fed “makes its first rate cut of 50 basis points” in September, instead of the 25 basis points expected by the market, “it will be its way of admitting” that it has taken too long to ease monetary policy, Innes believes.
For their part, analysts at Deutsche Bank They note that the magnitude of market anticipation of the number of Fed rate cuts “over the next 12 months has only been seen for a while now.” recession“.
In the debt market, US yields, which move in the opposite direction to bond prices, continued to fall, reaching 3.76% at 07:25 GMT, compared with 3.79% for 10-year bonds on Friday, showing investors’ interest in safer securities than stocks, considered a risky asset.
Source: Ambito
