As of the time of writing, the Nasdaq fell more than 3%, the S&P 500 fell more than 2%, and the Dow Jones Industrial Average fell nearly 2%, with the decline narrowing for the three major US stock indexes.
After the disappointing July non-farm payroll report was released last Friday, concerns about the U.S. economic recession became the main culprit for the global market crash.
Last week, the Federal Reserve chose to maintain interest rates at their highest level in 20 years, which made investors worry that the Fed did not act fast enough to prevent a sharp economic decline.
As concerns about the slowdown of the U.S. economy intensify, traders are betting that the Fed will take emergency rate cuts, with a 30% chance of a 25 basis point rate cut.
The latest released data shows that the non-manufacturing PMI of the USA in July was 51.4, with an expected value of 51 and a previous value of 48.8.
Neil Birrell, Chief Investment Officer of Premier Miton Investors, said: "It's obvious that these job figures have frightened everyone. Even the Fed is likely to think that we have to take action to provide market stability, which may be a downturn outside the cycle. Doing this based on a data point will be unusual a week after a policy meeting."
Christopher Dembik, Senior Investment Advisor at Pictet Asset Management, says that although there is the latest data, the economy is still relatively strong, so it is wrong to bet on the Fed taking action early.
Dembik said: "We are facing a panic market overreaction, but this is largely irrational. The economy is deteriorating, but stepping back is not a bad thing."
The U.S. economic recession concerns have also seriously affected other global markets.
Overnight in the Asian market, as Asia-Pacific investors had their first chance to react to the poor non-farm payroll data from the United States last Friday, the Japanese stock market plummeted and confirmed that it had entered a bear market.
On Monday, the Nikkei 225 index closed down 12.4% at 31,458.42, the worst performance of the index since the 1987 Wall Street massacre known as Black Monday, when the index plunged 4,451.28 points in a day, the largest single-day drop in its history. On Black Monday in 1987, the Dow Jones Index fell 22% in a single day.
After the Bank of Japan raised interest rates last week, rumors about the closing of yen carry trades intensified Monday's global market decline. The yen appreciated against the dollar, ending the way traders borrow cheap currencies to buy other global assets.
Traders scrambled to close popular carry trades, and the selling frenzy in Japan reached a feverish pitch, pushing the yen up 3%. The Nikkei 225 and TOPIX tumbled by more than 12%, falling more than 20% from their July highs and technically confirming a bear market.
As concerns about the U.S. economic slowdown intensify, investors are flocking to the bond market for safe-haven assets. The dollar weakened. U.S. Treasury yields collapsed, with the benchmark 10-year bond yield at 3.76% on Friday, far below the 4.20% of a week ago and the lowest level in a year. Bond prices are inversely proportional to yields.
Bitcoin plummeted from nearly $62,000 per coin last Friday to around $52,000 on Monday.
The Chicago Options Exchange Volatility Index (VIX), which measures market panic, soared to more than 53, the highest level since the outbreak of the COVID-19 epidemic in 2020.
Victoria Greene, Chief Investment Officer of G Squared Private Wealth, said: "It's painful. I think a lot has happened over the weekend that needs to be digested: Berkshire Hathaway significantly reduced Apple's holdings, the slump in the Japanese stock market, the appreciation of the yen, and the end of the yen carry trade. A lot of bad news is already reflected in the pricing of the U.S. stock market."
Greene said: "This is a pullback, a correction. At some point, we may reach oversold levels pretty quickly."
Focus stocks
Growth tech stocks experienced a general decline, with Nvidia falling more than 5%, Apple and Tesla falling by about 4%.
Most China concept stocks fell, with NIO Inc falling nearly 3%, Baidu falling more than 3%, and Alibaba falling more than 2%.
Bitcoin once fell to $0.05 million, and cryptos related stocks fell across the board,$MicroStrategy (MSTR.US)$,$CleanSpark (CLSK.US)$Declined by about 13%.$Coinbase (COIN.US)$fell more than 6%.
$Apple (AAPL.US)$Fell more than 4%. Previously, there were reports that Berkshire Hathaway sold half of its holdings of Apple stock.
$NVIDIA (NVDA.US)$Fell 5%. Previously, the stock had already fallen more than 23% from its recent high point.
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