Market Commentary: Monday 5th August

It is time to get off the sun loungers. The Nikkei is down 12.8%, marking the worst session since 1987. The Topix bank index is down 17%, with Mizuho losing 31% over the last three sessions and Softbank losing 47% of its value in the last month. This is due to a combination of a stronger yen and fear of a global recession after last week's NFP numbers. The debate about whether the Fed will cut 25bps or 50bps on September 18th is now over.

In other markets, the risk-off environment continues. Bitcoin fell 10% to $53,072.07, Ether fell 15% to $2,340.21, West Texas Intermediate crude fell 0.7% to $73.04 a barrel, and spot gold fell 0.2% to $2,438.21 an ounce. The yield on 10-year Treasuries declined to 3.73%, Japan’s 10-year yield declined 16 basis points to 0.795%, and Australia’s 10-year yield declined four basis points to 4.05%.

This week, we have the RBA on Tuesday. They are expected to keep interest rates steady after data last month showed that core inflation unexpectedly slowed to a two-year low in the second quarter, and the rate of economic growth moderated in the first quarter. As for today, we have Eurozone PPI, the US ISM Services Index, and speeches from Chicago Fed President Austan Goolsbee and San Francisco Fed President Mary Daly. But while the summer volatility continues, it is time to batten down the hatches.

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