Thursday Morning Coffee - Markets Update - 25 July 2024 - Tech Stock Meltdown Sparks Flight to Safety as Yen Hits 2.5-Month Peak
Markets Update: Asian stocks tumbled as global tech woes pushed investors to safe havens like bonds and the yen,?despite China's surprise rate cut,?with markets now fully pricing in a Fed easing by September due to the recent market turmoil and expectations of continued US economic growth.
?Global Markets Roundup: 25 July 2024
Asian stocks plummeted on Thursday, driven by a sharp downturn in global tech shares that pushed investors toward safer assets such as short-dated bonds, the yen, and the Swiss franc. The decline came despite China's central bank unexpectedly cutting long-term rates in an effort to bolster the economy, adding to a series of recent stimulus measures. This surprise move provided little relief to Chinese markets.
As a result, investors are now overwhelmingly betting on global rate cuts, with futures markets pricing in a 100% chance of a Federal Reserve easing in September. This market turmoil has led to increased volatility, causing a significant squeeze on carry trades and sending the dollar down 0.6% to 152.85 yen on Thursday.
Global Markets Overview:
On Wall Street, the Nasdaq experienced its worst one-day drop since 2022, falling nearly 4% due to disappointing earnings from Alphabet and Tesla. This decline further shook investor confidence in the high-flying "Magnificent Seven" stocks. The volatility index VIX spiked to a three-month high, with investors flocking to cash and short-term debt. U.S. two-year Treasury yields hit their lowest level in almost six months on Wednesday.
Short-dated bonds rallied following comments from Bill Dudley, who suggested the Federal Reserve should cut rates at its next policy meeting. The yield on two-year Treasuries fell 4 basis points overnight, stabilizing at 4.4121%. Markets are fully pricing in a quarter-point rate cut from the Fed in September, with some even considering a 50 basis point cut. For 2024, a total easing of 65 basis points has been priced in. U.S. GDP data, due later on Thursday, is forecast to show an annualized growth of 2% in Q2. The Atlanta Fed's GDPNow indicator suggests a higher growth rate of 2.6%, indicating potential upside risk.
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In currencies, The yen surged 0.6% to its strongest level in two and a half months, climbing 1.1% overnight. This upward momentum is expected to continue ahead of the Bank of Japan's meeting next week, where rate hikes will be debated. The Swiss franc USDCHF also saw a 0.7% rise overnight. The euro lost 0.7% to 165.59 yen EURJPY, while sterling GBPJPY?and the Australian dollar AUDJPY?traded 0.85% and 1.3% lower against the Japanese currency, respectively. The Australian dollar AUDUSD?also lost 0.55% $0.6545, while the kiwi NZDUSD?in the same direction hit a 2-1/2-month low of $0.5913. The EURUSD?traded flat at $1.0839, while sterling GBPUSD?edged 0.12% lower to $1.2890.
Commodities/Soft Commodities Markets:
Oil prices remained near six-week lows amid concerns over a slowing Chinese economy impacting demand.
Looking ahead today, markets anticipate French Business Confidence, German Ifo Business Climate, UK CBI Industrial Trends Orders, US Durable Goods Orders, US GDP Growth Rate, and US Initial Jobless Claims.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team