1 in 5 traders working on the floor of the New York Stock Exchange (NYSE) in New York City, USA, June 24, 2024. Reuters/Brendan McDiarmid/File photo
(1/5) Traders working on the floor of the New York Stock Exchange (NYSE) on June 24, 2024 in New York City, USA. REUTERS/Brendan McDiarmid/File Photo Purchase License Rights, opens in a new tab
NEW YORK/LONDON, Aug 2 (Reuters) – Surprisingly weak U.S. jobs data on Friday raised fears of a coming recession, prompting investors to dump stocks and turn to safe-haven bonds. I started to look towards it.
U.S. bond prices have soared, pushing yields to their lowest levels in months.
Crude oil price benchmarks fell by more than $3 per barrel at the lowest point in trading. The dollar index fell more than 1% to its lowest level since March.
Highly regarded tech companies endured much of the pain, with European banking indexes heading for their biggest weekly decline in 17 months on weak earnings.
Open in new tab VIX The stock market volatility index (.VIX), known as Wall Street’s fear gauge, rose more than 40%. Friday’s U.S. jobs report showed weaker-than-expected job growth in July, with the unemployment rate rising to 4.3%, pointing to possible weakness. Markets were already reeling from lackluster earnings updates from Amazon and Intel, the monthly US non-farm payrolls report showing slowing job growth, and Thursday’s weaker-than-expected USUS factory activity survey. was. The data raised expectations that the Federal Reserve would cut interest rates multiple times this year, but just this week it opted to keep rates on hold.
“The jobs report is a significant further confirmation that the Federal Reserve made a policy mistake by not lowering the federal funds rate this week,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia. “It shows progress.”
“It is very likely that the Fed will change its intermeeting communication on the balance of risks to remove any doubts about a September rate cut.”
The recession that started in Asia opens a new tab with a 5.8% drop in Japan’s Nikkei Stock Average (.N225), as thin summer trading likely exaggerates the move in March 2020 amid the coronavirus crisis It was the biggest single-day drop since then, spilling over into Europe and hitting Wall Street. The MSCI stock index (.MIWD00000PUS), which measures stocks around the world, fell 16.09 points (2.00%) to 787.31. The Nasdaq Composite Index (.IXIC) opens in new tab, down 417.98 points (2.43%) to 16,776.16. The index is down more than 10% from its July closing high and appears to be undergoing a correction as the economic downturn heightens concerns about high valuations. The Dow Jones Industrial Average (.DJI) opened in new tab fell 610.71 points (1.51 points). S&P 500 (.SPX) opens in new tab, down 100.12 points. Europe’s STOXX 600 (.STOXX) Opens in new tab fell nearly 3%, with finance and technology being hit the hardest. Emerging Markets Stocks (. MSCIEF), opens new tab, fell 24.30 points (2.23%) to 1,063.50. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) opened new tab closed 2.48% lower at 553.72. N225), Open in new tab, fell 2,216.63 points (5.81%) to 35,909.70.
The Fed has kept its benchmark borrowing costs at a 23-year high of 5.25% to 5.50% for a year, leading some analysts to believe that the world’s most influential central bank is controlling monetary policy too much. I think the economy may be tightening for too long and running the risk of a recession.
Money markets on Friday saw the Fed, already widely expected to cut interest rates starting in September, at a 70% chance of cutting rates by as much as 50 basis points (bp) next month in preparation for an economic downturn. Incorporated.
“The jobs report is sending a warning signal that this economy could turn around pretty quickly,” said Charlie Ripley, senior investment strategist at Allianz Investment Management in Minneapolis.
“Ultimately, today’s jobs report should embolden the committee to lower policy by more than 25 basis points at its next meeting.”
Quickly escape from technology to a safe haven
Shares of U.S. chipmaker Intel (INTC.O) fell to their lowest in more than 11 years, down more than 26% after suspending its dividend and announcing major layoffs along with underwhelming earnings forecasts. Finished the transaction. Artificial intelligence chip maker NVIDIA (. NVDA), one of the biggest contributors to the technology rally, has fallen more than 700% since January 2023, down 1.8%, opening in a new tab. It left many asset managers with significant exposure to fate.
Buying of safe assets has gotten into full swing, and government bonds, gold, and currencies have traditionally been on the rise. These are assets that are seen as more likely to hold value during market turmoil.
The yield on the benchmark 10-year U.S. Treasury note fell 18 basis points to 3.798%.
The two-year bond yield, which typically moves in line with interest rate expectations, fell 28.5 basis points to 3.8798%.
In foreign exchange markets, the yen rose nearly 2%, showing a sharp rebound after the Bank of Japan raised interest rates to the highest level in 15 years.
In the commodity market, spot gold fell 0.37% to $2,436.31 an ounce, while U.S. gold futures fell 0.4% to $2,4769.8.
Oil prices were hit by growth concerns, with global benchmark Brent crude futures falling $2.71, or 3.41%, to $76.81 per barrel. US West Texas Intermediate crude oil futures fell $2.79, or 3.66%, to end at $73.52.
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Additional reporting by Rae Wee in Singapore. Editing: Alex Richardson, Margherita Choi, Deepa Babington, Chizu Nomiyama
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