As a global stock sell-off continued on Monday, investors sought refuge in safe-haven assets following the release of underwhelming U.S. jobs data towards the end of the previous week.
The lackluster jobs report sparked apprehensions among investors that the Federal Reserve’s decision to maintain unchanged interest rates last week may have been a misstep, fueling concerns about a looming recession in the world’s largest economy.
The ongoing stock market turmoil has been compounded by volatility in key earnings reports and a more hawkish stance from the Bank of Japan. This shift has generated speculations that the well-known yen “carry trade,” where investors borrow in a low-interest currency like the yen to invest in higher-yielding assets, has encountered challenges over the short term.
In response to the escalating market uncertainties, investors flocked to safe-haven assets, causing the Swiss franc to strengthen by 1.2% against the dollar, reaching 0.847 – its highest level since January of this year.
Meanwhile, U.S. Treasury yields plummeted to a one-year low, with the 10-year Treasury yield dropping by over eight basis points to 3.7099% and the 2-year Treasury yield declining by approximately 14 basis points to 3.7315%. Additionally, Japan’s 10-year government bond yield also decreased to 0.204%.
Amidst the market unrest, gold futures surged by 0.38% to trade at $2,479.2 per ounce, contrasting sharply with the downward trend observed in stock markets.
U.S. stock futures saw a decline early on Monday, with the Dow Jones Industrial Average futures falling by about 600 points, or roughly 1.5%, by 4 a.m. ET. Similarly, S&P 500 futures and Nasdaq-100 futures experienced drops of 2.8% and 4.9%, respectively.
In Asia, Japan stocks confirmed a bear market, with the Nikkei plummeting by 12.4% to close at 31,458.42, marking its worst performance since the “Black Monday” of 1987.
The Stoxx 600 index in Europe also registered a significant decline of 2.34%, with all sectors and major regional bourses trending in negative territory. Tech stocks reported a 5% decrease before slightly recovering to a 2.8% downturn, while mining and bank stocks also faced notable losses.
Ted Alexander, the chief investment officer at BML Funds, acknowledged the long-anticipated market volatility but advised against panic, emphasizing that the current landscape could offer opportunities for active managers.
Alexander advised investors to maintain exposure to tech and growth stocks, indicating that equity markets still hold potential value despite the prevailing challenges.
