Stocks routed by US recession risk, bonds bet on rapid rate cuts
Asian stock markets : https://tmsnrt.rs/2zpUAr4
Nasdaq futures drop 2.2%, Nikkei sheds more than 5%
Markets wager Fed to cut by 50bps in Sept
Dollar on back foot after Treasury yields dive
Adds China stocks and data, updates prices
By Wayne Cole
SYDNEY, Aug 5 (Reuters) -Share markets tumbled and bonds rallied in Asia on Monday as fears the United States could be heading for recession sent investors rushing from risk assets while wagering interest rates will have to fall rapidly to rescue growth.
Investors began where they finished on Friday by knocking Nasdaq futures NQc1 down 2.27%, while S&P 500 futures ESc1 dropped 1.41%. EUROSTOXX 50 futures STXEc1 fell 0.6% and FTSE futures FFIc1 0.2%.
Japan's Nikkei .N225 shed a staggering 5.5% to hit seven-month lows, marking its biggest three-session loss since the 2011 financial crisis.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 2.0%. Chinese blue chips .CSI300 were a rare gainer with a rise of 0.4%, aided by a rise in the Caixin services PMI to 52.1.
Japanese 10-year bond yields JP10YT=RR fell a steep 17 basis points to the lowest since April at 0.785%, as markets radically reconsidered the prospect of another hike from the Bank of Japan. 0#BOJWATCH
Treasury bonds were in demand with 10-year yields US10YT=RR hitting 3.723%, the lowest since mid-2023.
Two-year yields US2YT=RR dropped to 3.818%, having already fallen 50 basis points last week , and could soon slide below 10-year yields, turning the curve positive in a way that has heralded recessions in the past.
The worryingly weak July payrolls report saw markets price in a near 70% chance the Federal Reserve will not only cut rates in September, but ease by a full 50 basis points. Futures imply 115 basis points of cuts in the 5.25-5.5% funds rate this year, and see rates around 3.0% by the end of 2025. FEDWATCH
"We have increased our 12-month recession odds by 10pp to 25%," said analysts at Goldman Sachs in a note, though they thought the danger was limited by the sheer scope the Fed had to ease policy.
Goldman now expects quarter-point cuts in September, November, and December.
"The premise of our forecast is that job growth will recover in August and the FOMC will judge 25bp cuts a sufficient response to any downside risks," they added. "If we are wrong and the August employment report is as weak as the July report, then a 50bp cut would be likely in September."
Analysts at JPMorgan were even more bearish, subscribing a 50% probability to a U.S. recession.
"Now that the Fed looks to be materially behind the curve, we expect a 50bp cut at the September meeting, followed by another 50bp cut in November," said economist Michael Feroli.
"Indeed, a case could be made for an inter-meeting easing, especially if the data soften further — although Fed officials might worry about how such a move could be (mis)interpreted."
SEEKING SAFE HARBOURS
Investors will get a read on employment in the service sector from the ISM non-manufacturing survey due later Monday and analysts are hoping for a rebound to 51.0 after June's unexpected slide to 48.8.
This week has earnings from industrial bellwether Caterpillar CAT.N and media giant Walt Disney DIS.N, which will give more insight into the state of the consumer and manufacturing. Also reporting are healthcare heavyweights such as weight-loss drugmaker Eli Lilly LLY.N.
The huge drop in Treasury yields had also overshadowed the U.S. dollar's usual safe-haven appeal and dragged the currency down around 1% on Friday =USD.
On Monday, the dollar was off another 1.0% on the Japanese yen at 144.99 JPY=EBS, while the euro was holding firm at $1.0920 EUR=EBS.
The Swiss franc was a major beneficiary of the rush from risk, with the dollar near six-month lows at 0.8533 francs CHF=EBS.
"The shift in expected interest rate differentials against the U.S. has outweighed the deterioration in risk sentiment," said Jonas Goltermann, deputy chief markets economist at Capital Economics.
"If the recession narrative takes hold in earnest, we would expect that to change, and the dollar to rebound as safe-haven demand becomes the dominant driver in currency markets."
Investors had also increased wagers other major central banks would follow the Fed's lead and ease more aggressively, with the European Central Bank now seen cutting by 67 basis points by Christmas.
In commodity markets, gold pulled back to $2,434 an ounce XAU=, perhaps undermined by investors taking profits to cover losses elsewhere. A similar pattern was seen in crypto currencies as bitcoin and ether both slid. GOL/
Oil prices bounced amid concerns about a widening conflict in the Middle East, though worries about demand had seen it sink to eight-month lows last week. O/R
Brent LCOc1 gained 27 cents to $77.08 a barrel, while U.S. crude CLc1 rose 23 cents to $73.75 per barrel.
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
Reporting by Wayne Cole; Editing by Stephen Coates and Shri Navaratnam
To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets For the state of play of Asian stock markets please click on: 0#.INDEXA
الأصول ذات الصلة
آخر الأخبار
إخلاء المسؤولية: تتيح كيانات XM Group خدمة تنفيذية فقط والدخول إلى منصة تداولنا عبر الإنترنت، مما يسمح للشخص بمشاهدة و/أو استخدام المحتوى المتاح على موقع الويب أو عن طريقه، وهذا المحتوى لا يراد به التغيير أو التوسع عن ذلك. يخضع هذا الدخول والاستخدام دائماً لما يلي: (1) الشروط والأحكام؛ (2) تحذيرات المخاطر؛ (3) إخلاء المسؤولية الكامل. لذلك يُقدم هذا المحتوى على أنه ليس أكثر من معلومات عامة. تحديداً، يرجى الانتباه إلى أن المحتوى المتاح على منصة تداولنا عبر الإنترنت ليس طلباً أو عرضاً لدخول أي معاملات في الأسواق المالية. التداول في أي سوق مالي به مخاطرة عالية برأس مالك.
جميع المواد المنشورة على منصة تداولنا مخصصة للأغراض التعليمية/المعلوماتية فقط ولا تحتوي - ولا ينبغي اعتبار أنها تحتوي - على نصائح أو توصيات مالية أو ضريبية أو تجارية، أو سجلاً لأسعار تداولنا، أو عرضاً أو طلباً لأي معاملة في أي صكوك مالية أو عروض ترويجية مالية لا داعي لها.
أي محتوى تابع للغير بالإضافة إلى المحتوى الذي أعدته XM، مثل الآراء، والأخبار، والأبحاث، والتحليلات والأسعار وغيرها من المعلومات أو روابط مواقع تابعة للغير وواردة في هذا الموقع تُقدم لك "كما هي"، كتعليق عام على السوق ولا تعتبر نصيحة استثمارية. يجب ألا يُفسر أي محتوى على أنه بحث استثماري، وأن تلاحظ وتقبل أن المحتوى غير مُعدٍ وفقاً للمتطلبات القانونية المصممة لتعزيز استقلالية البحث الاستثماري، وبالتالي، فهو بمثابة تواصل تسويقي بموجب القوانين واللوائح ذات الصلة. فضلاً تأكد من أنك قد قرأت وفهمت الإخطار بالبحوث الاستثمارية غير المستقلة والتحذير من مخاطر المعلومات السابقة، والذي يمكنك الاطلاع عليه هنا.