Market Analysis on August 5th

Global markets suffered heavy losses due to concerns about economic recession, triggering panic on 'Black Monday'. The Dow Jones Industrial Average fell nearly 1240 points at the beginning of the trading session, a decline of 3.1%, and further extended to over a thousand points at the close. The S&P 500 index briefly plummeted 4.2%, while the Nasdaq index dropped 6.4% at one point. The Russell 2000 index recorded the deepest decline of 5.5%. This is the largest three-day decline recorded by major indexes since June 2022. The 'fear index' VIX soared 181% to 65.73, reaching its highest level since the COVID-19 pandemic in March 2020.

After a sharp drop of about 7%, chip stocks rebounded briefly. Nvidia's stock price fell 15% at one point and ended the day with a decline of over 6%. Apple and Tesla both fell 4.8% and 4.2% respectively. In early trading, the total market capitalization of the 'Tech Seven Sisters' evaporated by $1.3 trillion. In contrast, the China concept stock index rebounded and closed higher after a 3.2% decline, with New Oriental's stock price rising nearly 9%.

The US Treasury yield curve briefly turned positive for the first time in two years, with the market predicting that the Federal Reserve may cut interest rates five times by the end of the year, each time by 25 basis points. The market even speculates that the Federal Reserve may take emergency rate-cutting measures to stabilize the market. Although the ISM Non-Manufacturing Index for July returned to expansion territory, it failed to prevent the decline in US Treasury yields. The 2/10-year Treasury yield curve momentarily ended its inversion, and benchmark bond yields plunged to a more than one-year low.

The US dollar index hit its lowest level in seven months, while the offshore renminbi rose to its highest level in over a year, reaching as high as 779 points. The yen appreciated by 3.3% at one point, breaking through the 142 level. In addition, the price of bitcoin briefly fell below $0.05 million.

Crude oil prices also suffered heavy losses, with US oil falling below $73 at one point, hitting a six-month low. Precious metals and industrial metals also declined, with silver prices plummeting. In the Asian market, all three major A-share indexes fell by more than 1%, Hong Kong stocks narrowed their decline at the close but still fell by more than 1%, while 30-year government bond futures reached new highs. The Japanese stock market also experienced a sharp decline.

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