Stock markets bounce back from rout in 'turbocharged turnaround Tuesday'. The recent stock market sell-off sparks ominous trending topics on social media. Wall Street plunges on recession fears. Japan stocks rebound sharply after worst rout in history.
Sources:
https://www.theguardian.com/business/live/2024/aug/06/stock-markets-bounce-back-rout-nikkei-ftse-turbocharged-turnaround-tuesday-business-live
https://www.foxbusiness.com/markets/stock-market-sell-off-sparks-ominous-trending-topics-social-media
https://www.dawn.com/news/1850380
https://www.cnn.com/2024/08/05/business/japan-nikkei-225-stock-market-rebound-intl-hnk/index.html
Outline:
(00:00:00) Introduction
(00:00:38) Stock markets bounce back from rout in ‘turbocharged turnaround Tuesday’
(00:03:05) Stock market sell-off sparks ominous trending topics on social media
(00:05:11) Wall Street plunges on recession fears
(00:08:08) Japan stocks rebound sharply after worst rout in history
Simply Economics
Stock Markets Rebound in Turbocharged Turnaround, Social Media Reacts to Sell-Off
Stock markets bounce back from rout in 'turbocharged turnaround Tuesday'. The recent stock market sell-off sparks ominous trending topics on social media. Wall Street plunges on recession fears. Japan stocks rebound sharply after worst rout in history.Sources:https://www.theguardian.com/business/live/2024/aug/06/stock-markets-bounce-back-rout-nikkei-ftse-turbocharged-turnaround-tuesday-business-livehttps://www.foxbusiness.com/markets/stock-market-sell-off-sparks-ominous-trending-topics-social-mediahttps://www.dawn.com/news/1850380https://www.cnn.com/2024/08/05/business/japan-nikkei-225-stock-market-rebound-intl-hnk/index.htmlOutline:(00:00:00) Introduction(00:00:38) Stock markets bounce back from rout in ‘turbocharged turnaround Tuesday’(00:03:05) Stock market sell-off sparks ominous trending topics on social media(00:05:11) Wall Street plunges on recession fears(00:08:08) Japan stocks rebound sharply after worst rout in history
- Duration:
- 11m
- Broadcast on:
- 06 Aug 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Tuesday, August 6th. On today's show, stock markets bounce back from the route in a turbocharged turnaround Tuesday, while the sell-off sparks ominous trending topics on social media, plus Wall Street plunges on recession fears. This coverage and more, up next. I'm David and you're listening to Simply Economics. We start off with some positive news from Japan's stock market. The Nikkei 225 index has staged a remarkable recovery today, bouncing back 10% after suffering its worst crash since 1987 on Monday. The index closed up over 3,200 points, marking a record points gain. This rebound comes amidst ongoing concerns about a potential U.S. recession and the end of the cheap money era. For more on this, we turn to our economics correspondent. So what factors contributed to yesterday's steep sell-off and today's subsequent recovery? There were several factors at play here. Firstly, fears of an impending U.S. recession have been weighing on global markets. These concerns were somewhat eased by strong U.S. service sector data released yesterday, which showed a rebound in new orders. Another key factor was the Bank of Japan's decision last week to lift interest rates, effectively squeezing the so-called Yen-carry trade, where investors borrowed Yen cheaply to invest in other assets. This move caught many off-guard and contributed to the market volatility. Some analysts have described yesterday as one of the wildest days in their careers. What made it so extraordinary? It was indeed a perfect storm of market dysfunctions. On the usual suspects like the Yen-carry trade, we witnessed wild surges in the VIX or Volatility Index. When the VIX spikes, it indicates a reduced capacity for the market to manage risk. It becomes a game of hot potato with high-stakes assets and fewer takers for each toss. This leads to a scenario that's more about risk aversion than risk management. Despite efforts by officials like Chicago Fed Bank President Austin Goolsbee to calm markets, Wall Street still posted its worst drop in almost two years last night. What do you think it will take to stabilize the situation? A stabilization in the Yen could be one key factor. The Yen has been on a wild ride, surging from $160 per dollar in early July to $141 per dollar yesterday, before settling around $145 today. Traders will also be closely watching for any signs that policymakers are responding to concerns over economic growth, such as a potential cut in U.S. interest rates. However, it's important to note that while strong U.S. service sector data provided some relief, it may not be enough to completely allay recession fears. As always, the market remains highly sensitive to economic indicators and policy decisions. We'll be keeping a close eye on upcoming data releases, such as today's German factory orders and U.S. trade data for further clues on the health of the global economy. Speaking of market turmoil, a broad sell-off in global markets has sparked ominous trending topics on social media, with users predicting economic doom. The hashtag #BlackMonday trended on X, formerly known as Twitter, after Japanese stocks suffered their worst single-day decline since the infamous Black Monday crash of 1987. As the market meltdown intensified and spread to Europe and the U.S., terms like the Dow and Great Depression also began trending. For more on this, we turn to our correspondent. What's behind this sudden surge of market pessimism on social media? The sharp market declines seem to have triggered a wave of panic and doom-saying among X users. As stocks plummeted across the globe, people took to the platform to voice their fears about a potential economic catastrophe. In the U.S., the sell-off also became politically charged, with hashtags like Kamala Crash, apparently referring to Vice President Kamala Harris and Bidenomics trending alongside the market-related terms. This suggests that some users are linking the market turmoil to the Biden administration's economic policies. But it wasn't just the economy driving the gloomy sentiment on social media, was it? Real political concerns also seem to be weighing on users' minds. That's right. Escalating tensions between Israel and Iran had the term "middle-east trending" with over 156,000 posts. This geopolitical unrest, combined with the market instability, even led to speculation about the possibility of a Third World War, with the term "wool will read" appearing in more than 67,000 posts. It's clear that the confluence of economic and geopolitical uncertainties has created a sense of anxiety and foreboding among many social media users. Social media can often serve as a barometer of public sentiment during times of crisis. The trending topics and hashtags we're seeing reflect the very real fears and concerns people have about the state of the global economy and geopolitical stability. While it's important not to get caught up in doomsday scenarios, the market's sell-off and rising tensions in the Middle East are issues that warrant close attention in the days and weeks ahead. Speaking of the markets, Wall Street's main indexes slumped on Monday as risk appetite among investors dropped on fears of a U.S. recession following weak economic data last week, sending tremors across global markets. Here to discuss the market turmoil is our simply economics correspondent. So what exactly spooked investors and caused this sharp sell-off? There were a few key factors at play. First, the disappointing jobs report and shrinking manufacturing activity last week raised serious concerns about the health of the U.S. economy. This was compounded by dismal forecasts from big tech companies pushing the NASDAQ indexes into correction territory. Additionally, the so-called "som rule" seen by many as a historically accurate recession indicator was triggered by the weak data. And we saw some major stocks like Apple and Nvidia getting hit particularly hard. What's the story there? That's right. The magnificent seven group of stocks, which have been the main drivers pushing indexes to record highs this year, lost a combined $650 billion in market value. Apple fell nearly 4% after Berkshire Hathaway halved at stake, possibly signaling that Warren Buffett is growing wary about the broader economy or lofty valuations. Nvidia slid over 6% while Microsoft and Alphabet dropped around 3% each. In light of this sell-off and recession fears, how are expectations shifting for the Federal Reserve's next moves on interest rates? Traders are now pricing in a much higher probability that the Fed will cut rates aggressively in September. The CME's FedWatch tool shows a 92.5% chance of a 50-basis-point cut compared to just an 11% chance seen last week. However, Chicago Fed President Austin Goolsbee downplayed recession fears while noting officials need to be cognizant of changes in the environment to avoid being too restrictive. Any other notable market indicators flashing warning signs? Absolutely. The CBOE Volatility Index, known as Wall Street's fear gauge, breached its long-term average of 20 points last week and surged to nearly 73. U.S. Treasury yields tumbled to their lowest in a year, and the closely-watched gap between two-year and 10-year Treasury notes turned positive for the first time since July 2022, which typically indicates the economy is heading into a downturn. Thank you for that insightful analysis of today's market turmoil. It's certainly a lot for investors to digest as they navigate this challenging environment. Speaking of market moves, Japanese shares soared on Tuesday, clawing back some of their record losses from the previous day and underpinning a regional rally. The benchmark Nikkei 225 index finished 10% higher while the broader topics closed up around 9%. For more on this rebound and what it means, we turn to our markets correspondent. So this bounce in Japan seems to have helped lift markets across Asia today. What's your read on this turnaround? That's right. The strong rebound in Japanese stocks had a positive ripple effect across Asian markets. South Korea's cost by rose 3.3%, Taiwan stocks gained 3.4%, and even markets in Australia, China and Hong Kong posted modest gains despite suffering substantial losses in the previous session. As one analyst put it, "This type of bounce is typical after a market crash." The fundamentals of the Japanese economy remain sound, so there's no evidence of investors abandoning Japanese equities on mass. But even with this rebound, it seems there are still concerns about volatility in the near term. What are analysts saying about the outlook going forward? Short-term volatility is expected to persist as the market believes the US dollar has not yet stabilized against the Japanese yen. Analysts from UBS suggest it's too early to conclude the Japanese stock market has hit bottom. They anticipate any sustained recovery would likely only occur after Japanese corporates report first half earnings in October, or even after the US presidential election in November. And we have to remember, Monday's plunge in Japan triggered a global market route with major indexes in Asia, Europe and the US all falling substantially. The Nikai alone lost over 4,400 points, its biggest ever one-day decline. That spooked investors worldwide. Absolutely, fears that the US economy was slowing faster than expected, rippled through global markets. Wall Street took a beating with the S&P 500, Dow and NASDAQ all falling between 2.6% and 3.4%. However, futures markets are indicating the tide may be turning there as well, with the S&P 500 and NASDAQ futures bouncing back after the close of Monday's main trading session. So while there's some relief with this rebound, investors will be closely watching economic indicators and corporate earnings in the coming weeks and months to gauge the health of the global economy. Certainly a lot for the markets to digest in this volatile period. Thanks for that update and analysis of the situation in Japan and beyond. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]