European and US stock futures experienced a decline on Wednesday, with Asian equities also suffering losses due to a selloff in US markets triggered by a significant drop in Nvidia Corp. The Euro Stoxx 50 contract fell by 1.3%, while S&P 500 futures dropped 0.5%, reflecting Wall Street’s losses. The Asian market saw a decline of more than 2% due to concerns surrounding the artificial intelligence sector, leading to a drop in shares of chipmakers like Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc.
The risk-averse sentiment at the beginning of a challenging month for markets was fueled by a US manufacturing gauge missing forecasts once again, raising concerns about a potential economic slowdown in the largest global economy. This added to the negative sentiment in Asia, where disappointing Chinese data was already impacting risk assets.
Treasury yields stabilized after a previous decline, while the dollar index ended a five-day winning streak. The yen strengthened, and oil prices fell following a 5% drop amid concerns over weak demand and oversupply.
Although the early August selloff initially raised concerns, growing expectations of a US rate cut quickly reversed the downward trend. The recovery was further supported by dovish comments from Federal Reserve Chair Jerome Powell at the recent Jackson Hole symposium.
In other parts of Asia, the Australian dollar remained under pressure as economic weakness persisted in the second quarter. Chinese stocks also fell after a private survey indicated slower-than-expected services activity growth, highlighting the fragile state of the economy.
The S&P 500 and Nasdaq 100 saw their worst September starts since 2015 and 2002, respectively. With inflation expectations stable, focus shifted to the economy’s health, as signs of weakness could prompt further policy easing. While rate cuts typically benefit equities, a rushed approach by the Fed to prevent a recession may not have the same positive impact.
Traders are anticipating a significant rate cut by the Federal Reserve over the next year, with expectations exceeding two percentage points, marking the steepest drop outside a recession since the 1980s.
Looking ahead, key economic data releases are scheduled for this week, including the US jobs report. The S&P 500 and Nasdaq 100 experienced significant losses, with Nvidia’s sharp decline leading to a record one-day wipeout of $279 billion. The US Justice Department also issued subpoenas to Nvidia and other companies amid antitrust concerns.
Major upcoming events include economic data releases in the Eurozone and the US, as well as speeches by key Federal Reserve officials. Overall, market movements reflected a cautious sentiment amid ongoing economic uncertainties and geopolitical challenges.
This content was adapted from a Bloomberg article with assistance from Rob Verdonck and Joanna Ossinger. ©2024 Bloomberg L.P.