Aside from ongoing worries about a US recession, the continuation of the pressure on markets has been attributed to the unwinding of the yen carry trade and geopolitical fears surrounding an expected Iranian military retaliation against Israel after Israel killed a high-ranking Iranian military official,
Investors are gripped by fears that the Federal Reserve has waited too long to pivot on its policy, especially in light of Friday's disappointing US jobs data and a slew of other weak economic indicators pointing toward a looming recession,
In our assessment a lot of this (market sell-off) has been down to position capitulation as a number of macro funds have been caught the wrong way around on a trade, and stops have been triggered, initially starting with FX and the Japanese yen,
We think it's really wrong to start fundamentally reassessing your view on the outlook here. Doing so is simply fitting a narrative to match the price action,
You can't unwind the biggest carry trade the world has ever seen without breaking a few heads,
It's a yen-funded carry unwind and Japanese stock unwind,
We don't see evidence in data that's saying we're looking at a hard landing,
Despite the widespread downturn in global markets, A-shares' resilience against declines indicates that previous adjustments have been quite sufficient,
More importantly, it (the stock slump) may reflect fundamental concerns, specifically the unclear economic outlook in the US, with the recent data releases, including labor market indicators, also below expectations,
Capital tends to seek new valuation opportunities, and A-shares and Hong Kong stocks are undoubtedly among these attractive valuation areas,
As to how much it may draw in terms of foreign investment, it will also depend on domestic economic conditions and policy developments,
To put it mildly, the spike in volatility-of-volatility is a spectacle that underlines just how jittery markets have become,
Investor sentiment was down as the U.S. employment data for July came in lower than expected, raising fears that the U.S. economy is slowing more than expected,
The pan-European STOXX 600 index was down 3.1% to 482.42 points by 0711 GMT, hitting its lowest since Feb. 13. The benchmark is also set for its worst day in 2-1/2 years.”
One very important difference in 2024 is extreme degree to which risk assets have front-run Fed cuts,
It's a pretty dramatic shift in narrative, which shows how much of the recent trends were backed by expectations of a US soft landing, ... The more the US soft landing assumption gets questioned, the further pullback we could see in equities and strategies funded with the low-yielding currencies where positioning has been massively skewed
From a Fed perspective, this does not translate into making hasty policy decisions, but it should help them remove the rose-tinted glasses when assessing policy decisions at the next meeting,
The scenario of higher unemployment constraining spending and further restraining hiring and incomes and economic activity leading to a recession is the feared scenario here.”
Now that the Fed looks to be materially behind the curve, we expect a 50bp cut at the September meeting, followed by another 50bp cut in November,
The shift in expected interest rate differentials against the US has outweighed the deterioration in risk sentiment,