US Markets Decline Amid Oil Prices, Inflation Worries (08.10.2024)
Global markets experienced significant fluctuations on Monday, as surging oil prices, rising Treasury yields, and inflation fears weighed heavily on U.S. indices. The S&P 500, Dow Jones, and Nasdaq all declined by around 1%, with cyclical sectors like tech and consumer discretionary leading the downturn. Meanwhile, the dollar strengthened, and Middle East tensions heightened market volatility.
European Market Performance
In contrast, European markets fared slightly better. The Stoxx 50 climbed by less than 0.3%, boosted by a 1% gain in household goods. Despite cautious trading, Europe held steady while U.S. markets struggled under the weight of inflationary concerns and rising yields.
Asian Markets See Mixed Results
Asian equity markets on Tuesday reflected a mixed picture. Mainland China’s CSI 300 started the day with a robust gain of over 10%, although enthusiasm waned, trimming the final increase to 5% as optimism around stimulus faded. On the other hand, Hong Kong’s Hang Seng fell by more than 6%, while Japan’s Nikkei and Topix dropped by approximately 1% due to weaker-than-expected household spending data.
South Korea’s Kospi shed 0.72%, primarily impacted by disappointing guidance from Samsung, while Australia’s ASX 200 saw a marginal decline.
Key Drivers for Market Movements
- Rising U.S. interest rates: Concerns about Federal Reserve policy, with reduced expectations for rate cuts, continued to dominate the narrative.
- Tensions in the Middle East: The ongoing geopolitical issues affected global sentiment, driving investors away from riskier assets.
Oil Prices and US Dollar Strengthen
Oil prices dipped slightly in Asian trade after strong gains the previous week, with profit-taking and a stronger U.S. dollar capping further increases. Ongoing concerns about potential disruptions from Hurricane Milton and Middle East tensions kept investors cautious, while traders closely watched possible supply issues in the Gulf of Mexico.
US Dollar Near Seven-Week Highs
The US dollar continued its rally, staying near seven-week highs. Strong jobs data shifted market sentiment, with investors reducing expectations for aggressive rate cuts by the Federal Reserve. Escalating Middle East tensions further supported the dollar’s strength against major currencies like the euro, sterling, and yen.
Corporate News Highlights
- Foxconn: A senior executive at Foxconn revealed plans to construct the world’s largest Nvidia GB200 chip production site. Speaking at the company’s annual tech day in Taipei, Benjamin Ting, Foxconn’s Senior Vice President for Cloud Enterprise Solutions, confirmed the project but did not disclose the location.
- Samsung: Samsung announced that its Q3 profit is expected to fall below market estimates, citing delays in its AI chip business and heightened competition from Chinese manufacturers.
- Super Micro Computer: Super Micro Computer announced it is shipping over 100,000 graphics processors per quarter and introduced a new range of liquid cooling products, boosting its shares by approximately 14%.
- Apple: Jefferies downgraded Apple from Buy to Hold, reflecting concerns over slower iPhone sales growth.
- Shell: Shell reported a nearly 30% drop in refining profit margins for Q3, with indicative margins falling to $5.5 per barrel from $7.7, reflecting weakened global demand and new refinery openings.
Market Outlook
Looking ahead, European markets are expected to open cautiously amid rising concerns over U.S. interest rates and continued geopolitical uncertainty. U.S. share index futures remained flat in evening trading on Monday, with Wall Street bracing for additional pressure following the recent strong payroll report.
Upcoming key events include:
- Inflation data
- Federal Reserve minutes, both of which could significantly impact market direction for the remainder of the week.
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