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The epic global plunge continues.

The current market is increasingly concerned about the risk of a US recession. On the evening of August 5, Beijing time, after the US stock market opened, the three major US stock indexes plummeted across the board. The Nasdaq plunged more than 6% at the beginning of the session, and the S&P 500 index plummeted more than 4%. The total market value of the "Seven Big Tech Companies" in the US stock market plummeted by US$1.29 trillion (about RMB 9.3 trillion), and then the decline narrowed. The European market also fell across the board, with the European Stoxx 600 Technology Index falling by more than 5% at its deepest point, hitting its lowest point since January this year.

After the unexpected "cold" U.S. non-farm payrolls data for July, the shadow of recession loomed over Wall Street, and the market is betting that the Federal Reserve will cut interest rates on a large scale to prevent a feedback loop between the market and the real economy that would trigger a recession. Some Wall Street analysts even pointed out that the Federal Reserve may be forced to urgently initiate an interest rate cut before the September interest rate meeting. JPMorgan Chase and Citigroup also urgently adjusted their forecasts, predicting that the Federal Reserve will cut interest rates by 50 basis points in September.

In addition, Buffett's large-scale selling in the second quarter also exacerbated market concerns. Wall Street analysts said that Buffett's large-scale selling may be due to concerns about a recession and that Berkshire is a "company preparing for a weak economic environment."

A complete collapse

Just now, the U.S. stock market collapsed across the board.

On the evening of August 5th, Beijing time, after the U.S. stock market opened, the three major indexes plummeted across the board. The Nasdaq fell more than 6% at the beginning of the session, and the S&P 500 fell more than 4% at one point. The decline then narrowed. As of 23:00, the Nasdaq fell 3.48%, the S&P 500 fell 2.98%, and the Dow Jones fell 2.58%.

Among them, U.S. technology giants suffered a fierce sell-off. As of 23:00, Nvidia plummeted more than 7%, Tesla fell 4.8%, Amazon fell more than 4%, Meta fell more than 3%, and Microsoft and Google A fell more than 2%.

Apple plunged more than 10% at one point, then narrowed its losses to 4.9% after Berkshire Hathaway slashed its stake in Apple. At the same time, Barclays lowered its target price for Apple from $187 to $186, maintaining its "underweight" rating.

Through calculation, at the beginning of U.S. stock trading, the total market value of the above-mentioned "Seven Technology Giants" plummeted by as much as 1.29 trillion U.S. dollars.

U.S. chip stocks also fell collectively, with Intel and Arm falling more than 7%, Broadcom and TSMC falling more than 3%, AMD and Micron Technology falling more than 5%, and Intel and Qualcomm falling more than 1%.

Due to concerns about the risk of a US recession, U.S. financial stocks plummeted across the board. As of 23:00, Citigroup plummeted more than 5%, Goldman Sachs, Wells Fargo and Morgan Stanley fell more than 4%, Bank of America fell 3.9% and JPMorgan Chase fell 2.4%.

Affected by the plunge in the cryptocurrency market, related concept stocks fell across the board. Oil stocks also fell across the board, with Shell falling 3.9%, BP and Equinor falling more than 3%, and Total, Eni and Petrobras all falling more than 2%.

European markets also collapsed across the board. The STOXX Europe 600 Technology Index once plummeted by more than 5%, hitting its lowest point since January this year during the session; the STOXX Europe 50 Index fell 2.8%, the Turkish Istanbul 100 Index plummeted by more than 6%, the Belgian BFX Index plummeted by 4.2%, the Italian FTSE MIB Index fell by more than 3%, the German DAX Index, the British FTSE 100 Index, and the French CAC40 Index all fell by more than 2%.

During the Asian trading session, Asia-Pacific stock markets also collapsed across the board, with the Japanese stock market experiencing an epic collapse. The Nikkei 225 index plummeted 12.4%, the largest single-day drop in history; the Japanese Topix index also plummeted by more than 12%; the South Korean Composite Index and the South Korean KOSDAQ Index both triggered circuit breakers, plummeting by 8.77% and 11.3% respectively.

Goldman Sachs Group Inc. said in a report on Monday that hedge funds focused on the Japanese market suffered their biggest single-day performance loss ever.

Analysts pointed out that the trading logic behind the "Black Monday" in Asia-Pacific stock markets was mainly due to market concerns that the impact of the weak US economy would spill over to the world.

At the same time, gold and silver also fell sharply. Spot gold fell below the $2,400 mark for the first time since July 30, and fell by more than 3% during the day; spot silver fell below the $27 mark for the first time since May 6, and fell by more than 7% during the day.

The recession trade is here

After the U.S. non-farm payrolls data for July unexpectedly came out as a surprise, the shadow of recession shrouded Wall Street, and the ICE/Bank of America U.S. Junk Bond Index spread recorded its largest single-day increase since March 2023.

In addition, the U.S. 2-year Treasury yield fell below the 10-year yield for the first time since July 2022. The 2-year and 10-year yield curves remained inverted for the longest time on record, indicating that the Fed's policies may have contributed to a hard landing of the U.S. economy.

The market is currently betting that the Federal Reserve will cut interest rates massively to prevent a recession-causing feedback loop from forming between the market and the real economy.

On August 5, local time, Jan Hatzius, chief economist of Goldman Sachs, raised the probability of the United States falling into recession in the next year from 15% to 25% in his latest report. He also predicted that the Federal Reserve will cut interest rates by 25 basis points in September, November and December.

In contrast, JPMorgan Chase & Co. and Citigroup Inc. have adjusted their forecasts to expect the Fed to cut rates by 50 basis points in September.

However, Hatzius believes there is no need to worry too much about a recession even if unemployment rises. The economy continues to be "generally sound," there are no major financial imbalances, and the Fed has plenty of room to cut rates and can act quickly if needed.

Jim Reid, global head of macro research and thematic strategy at Deutsche Bank, said markets were already nervous before last Friday, but weak jobs data exacerbated volatility.

But George Boubouras, head of research at K2 Asset Management, said the market is clearly concerned about the recent softening of economic data. However, the reaction to last Friday's employment data seems excessive because it is only a monthly data. Three-month rolling data will provide better guidance.

The market currently expects the Fed to cut interest rates by 50 basis points in the next three meetings. It is worth noting that the Fed has never cut interest rates so much since the epidemic or the credit crisis.

Some analysts even said that the Fed may be forced to urgently start cutting interest rates before the September interest rate meeting. Nigel Green of deVere Group said in his latest report that it would be a dereliction of duty if the Fed did not cut interest rates as soon as possible, but waited until the next meeting in September to cut interest rates.

But analyst Marcus Ashworth believes that as global stock markets plummet, traders are talking about the Federal Reserve's possible emergency rate cut, but this is not only unlikely, but will be counterproductive. Fundamentally, the stock market decline is a liquidation of market positions, not a response to economic shocks. There is nothing wrong with the US economy, so there is no reason for monetary authorities to intervene.

Kyle Rodda, senior market analyst at financial website Capital.Com, said: "We will continue to see a large-scale deleveraging trend (in global stock markets) as investors are forced to sell assets to make up for losses. Such a speed of selling is really unprepared, and many of them are panic selling, which often leads to non-linear (not proportional to the news) reactions in asset prices."

In addition, Buffett's large-scale selling in the second quarter also exacerbated market concerns. CFRA Research analyst Cathy Seifert commented that Buffett's large-scale selling may be due to concerns about a recession, and Berkshire is a "company preparing for a weak economic environment."

In this regard, senior analyst Jesper Koll said that Buffett's move seems to imply that in the global financial market, everything starts and ends in the United States. As the risk of a U.S. economic recession increases sharply, the dollar appreciation cycle is about to end.

Editor: Tactical Heng

Proofreading: Zhao Yan