Asian Stocks Tumble, Nikkei Enters Bear Market

Asian markets plunged, with the Nikkei dropping 7% at one point and entering bear territory after falling 20% from its peak. Futures indicate a 73% chance of a 50 basis point rate cut by the Fed in September, while ECB and BoE are also expected to cut rates further. Investors are closely watching the US ISM services index and the Fed's senior loan officers survey for signs of economic stress.

Equities

The FTSE 100 fell 1.3% amid a global market slump, driven by weak US jobs data that heightened recession fears. The mid-cap FTSE 250 dropped 3%, marking its worst day since September 2022. In the UK, investment banking and brokerage stocks decreased by 4.3%, with notable losses in personal goods shares such as Burberry, which fell nearly 5% following a 41% decline in first-half operating profit reported by Italian peer Salvatore Ferragamo. Industrial metal miners slipped 2.1% due to lower gold and copper prices, while banks extended their declines from the previous session, losing 3.6%. The IAG Group rose 4.7% after British Airways owner terminated its proposed takeover of Spain's Air Europa due to regulatory concerns.

In the US, stocks dropped for a second consecutive session, with the Nasdaq Composite entering correction territory. The Dow Jones Industrial Average fell 1.51% to 39,737.26, the S&P 500 lost 1.84% to 5,346.56, and the Nasdaq Composite dropped 2.43% to 16,776.16. Amazon saw an 8.79% decline, and Intel plunged 26.06% after both companies released quarterly results and disappointing forecasts. Apple rose 0.69% on better-than-expected third-quarter iPhone sales and a positive forecast driven by AI.

Chip stocks continued their downturn, with the Philadelphia SE Semiconductor Index closing at a three-month low after its biggest two-day slide since March 2020. The Nasdaq Composite confirmed it was in a correction, falling more than 10% from its July closing high. The S&P 500 closed at its lowest level since June 4, while both the S&P and the Dow recorded their biggest two-day slides since March 2023. The small-cap Russell 2000 index dropped 3.52% to a three-week low, also marking its biggest two-day decline since June 2022.

The CBOE Volatility Index, Wall Street's "fear gauge," rose to 29.66, its highest mark since March 2023, before closing at 23.39. Despite the broad selloff, some market participants saw this as an opportunity to buy stocks at lower prices, with UBS strategist Jonathan Golub highlighting that market returns are typically greatest when the VIX is extended.

Forex & Commodities

The US dollar fell to a four-month low following a weak jobs report for July, which increased expectations of a 50 basis point rate cut by the Federal Reserve in September. The dollar index dropped 1.1% to 103.21, the largest one-day percentage drop since November. Treasury yields also fell, with two-year yields reaching their lowest since May 2023.

Gold prices rose 0.14% to $2,446.83 per ounce, driven by recession fears and expectations of aggressive Fed rate cuts. US gold futures climbed 0.8% to $2,488.50. Safe-haven demand also boosted the Japanese yen and Swiss franc, with the yen gaining 1.84% to 146.62 per dollar and the franc strengthening 1.58% to 0.859 per dollar.

Oil prices dropped sharply, with Brent crude settling at its lowest since January, down 3.41% to $76.81 per barrel, and West Texas Intermediate crude falling 3.66% to $73.52. The decline was attributed to weak US job growth, poor economic data from China, and falling manufacturing activity globally. Despite the OPEC+ meeting leaving oil output policy unchanged, concerns about demand growth continue to pressure prices.