Market News – AI Mania Over? Stocks, Gold & Oil Dip; Yen Surges

Economic Indicators & Central Banks:

• Wall Street plunged and Treasuries bear steepened in an anxious trade.
• News that ex-Fed president Dudley was now calling for the FOMC to cut rates next week amid recession fears added to investor angst.
• European stock markets continued to decline alongside Asian equity futures, intensifying a global downturn in technology shares following the US session, as investors are pulling back on the artificial-intelligence frenzy that has powered the bull market this year.
• Traders moved away from megacaps to underperforming segments of the market, driven by expectations of Fed rate cuts and doubts about AI’s immediate payoff.
• Nasdaq experienced its largest single-day drop since 2022, while S&P 500 broke its longest run without a 2% drop since 2007.
• The Canadian Dollar dropped as the Bank of Canada cut rates, emphasizing “downside risks are taking on increased weight in our monetary policy deliberations.”
• The Japanese Yen reached its highest level since May as carry trades unwound.

• Key events today: Germany IFO business climate, US GDP, initial jobless claims, durable goods.

Asian & European Open:

• Tech led the slump with the NASDAQ dropping -3.64%, the biggest 1-day selloff since March 2020. The S&P500 fell -2.31%. The Dow dropped -1.25%. Disappointing news from Alphabet and Tesla after the bell Tuesday got the bears going and rising concerns over the staying power of AI trades exacerbated declines through the day.
• In Japan, Nikkei entered a technical correction while the broad Topix index, which had reached a record high earlier this month, plunged over 2.5%, erasing its July gains and hitting a five-week low.
• Earning: Apple, Microsoft, Amazon, and Meta are set to report results next week.

Financial Markets Performance:

• The USDIndex tumbled to 104.12 in morning action, down from Tuesday’s 104.45, but rallied back slightly to close at 104.37.
• The Yen holds strong thanks to expectations for a BoJ rate hike next Wednesday, with USDJPY breaching 200-day EMA. The USD firmed versus CAD after the BoC’s dovish cut. The USDCAD reached April’s peak at 1.3827.
• Oil prices declined, but are once again trying to stabilize, following API data showing that US crude inventories declined by 3.9 million barrels last week. Inventories have declined for four straight weeks now. However, weak growth in top importer China and renewed optimism of a ceasefire in the Middle East have kept supply expectations underpinned. WTI is currently trading at USD 77.38 per barrel, Brent at USD 81.49 as markets wait for the official U.S. inventory report.
• Gold is down to $2370 a two-week low. The downfall could be attributed to some technical selling, though it is expected to be limited, considering the fundamentals, such as Fed’s cut and the risk-off mood which could support Gold ahead of the US data.

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Andria Pichidi

Market Analyst

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