[ad_1]
Series of steps:
At the close of trading on August 6, global financial markets woke up from the chaos of sharp stock market declines and widespread sell-offs the previous day, which was the result of a combination of factors.
In the face of this chaos that began in mid-July, as U.S. companies began reporting second-quarter 2024 earnings, global stock market value evaporated about $6.4 trillion.
Although the market improved in Tuesday’s trading, there are still concerns about another negative reaction in the coming weeks, especially assuming that the United States will produce negative data related to unemployment or inflation.
According to Anatolia’s monitoring of global market dynamics this week, four sparks triggered turmoil in financial markets and caused a drop in the market value of international listed companies.
The first trigger was that after companies such as Intel reported second-quarter 2024 financial results that were lower than expected, artificial intelligence stocks reversed from their historical peaks to a rapid decline.
Investments in artificial intelligence have exceeded $100 billion this year, leading investors to wait for a return on these investments, but the results have been the opposite of expectations.
The second highlight was the U.S. unemployment data, which showed that the unemployment rate rose to 4.3% in July last year, the highest level since October 2021.
The data showed an acceleration in unemployment and a sharp slowdown in job creation compared with 4.1% in June last year, sparking panic that the U.S. economy could be in recession.
The third spark was Berkshire Hathaway selling part of its stake in Apple, a sale that was seen as a sign by Berkshire Hathaway chairman Warren Buffett that Apple’s stock, the world’s largest company, may have peaked.
Apple is the world’s largest public company, with a market value of more than $3.1 trillion, and Buffett is considered a guide for thousands of investors around the world for his success in predicting market trends.
The final spark though was Japan’s rate hikes and the weight of the so-called carry trade between the yen and the dollar, the process of borrowing yen at low rates over the past few years and buying U.S. stocks.
However, the Bank of Japan raised interest rates, increasing loan costs for Japanese borrowers who borrowed and bought shares on Wall Street, only to sell the shares to repay the loans.
In Tokyo, the Nikkei fell 12% during the trading session on August 5, the index’s worst performance since 1987, before rebounding 10% during yesterday’s (Tuesday) trading session, while the index rose 2.6% in the last hour of trading on Wednesday.
What is clear from what is happening to major global investors is that the pillars that have supported the rise in financial markets in recent years have been shaken.
These pillars are that the US economy cannot stop growing; that AI will rapidly revolutionize the world of business around the world; that Japan will never raise interest rates, and that the credibility of all these policies has been shaken in the recent crisis.
More importantly, the recent blow has made investors realize that there may be a bubble in technology stocks, such as Nvidia’s stock price, which has risen 1,100% in less than two years.
The rise was accompanied by smaller gains in technology company stocks, fueling concerns that stocks are being sold and traded at higher prices than they are actually worth, threatening to cause a bubble to burst.
The recent “Black Monday” has prompted calls for the Fed to start cutting interest rates rather than waiting until its next meeting on Sept. 16-17.
Financial market analysts describe the crisis of August 5 as “Black Monday”. There have been more than one “Black Monday” in modern history, the most famous being the outbreak of the Great Depression on October 28, 1929, and the outbreak of the Great Depression on October 19, 1987. In one day, the US financial market suffered the worst collapse in history.
According to historical data from the Federal Reserve, the current US dollar interest rate is between 5.25% and 5.5%, the highest level in 23 years.
(Anatolia)
[ad_2]
Source link
