U.S. stocks are set to open sharply lower Monday, adding to steep declines in Asia and Europe and deepening a sell-off tied to worries about the U.S. economy.
By Elaine Kurtenbach and Matt Ott, Associated PressA monitor shows the Nikkei 225 stock index in Tokyo, Monday, Aug. 5, 2024, indicating at one point, over 2,537 points of lowering.
The shakeup began just a couple of days after U.S. stock indexes had jumped to their best day in months after Federal Reserve Chair Jerome Powell set the stage for possible rate cuts to begin in September. On Monday, the Nikkei closed down 4,451.28 points at 31,458.42. It had dropped 5.8% on Friday, making this its worst two-day decline ever.
Analysts said another factor contributing to the falling share prices was carry trades, where investors borrow money from a country with low interest rates and a relatively weak currency, like Japan, and invest those funds in places that will yield a high return. Investors have been selling stocks to repay those loans as their costs have risen with a stronger yen and higher interest rates.In Europe, markets in London, Paris and Frankfurt each dropped more than 2%.
“To put it mildly, the spike in volatility-of-volatility is a spectacle that underlines just how jittery markets have become,” Stephen Innes of SPI Asset Management said in a commentary. “The real question now looms: Can the typical market reflex to sell volatility or buy the market dip prevail over the deep-seated anxiety brought on by this sudden and sharp recession scare?”
Investors will be watching for data on the U.S. services sector from the U.S. Institute for Supply Management due later Monday that may help determine if the sell-offs around the world are an overreaction, Yeap Jun Rong of IG said in a report.
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