Global stock markets plummeted today, with the VIX, a measure of market volatility, surging above 65 points, its highest level since 2020. This spike was driven by renewed fears of a possible US recession following weaker-than-expected labour market data published last Friday. The sell-off was intensified by last week’s Bank of Japan (BoJ) interest rate hike, which pushed investors to unwind their yen carry trades. As traders liquidated their positions to repay yen loans, they sold stocks and other assets, leading to a broad-based sell-off. The dollar index continued its decline, finding support at 102.5, while the 10-year US Treasury yield briefly fell to its lowest level since June 2023 before rebounding to 3.8%.
The equity downturn spilled over into the base metals complex, causing decreases across the board. After a brief rally, copper plunged by almost 5%, touching $8,700/t before stabilising around $8,900/t. Aluminium fluctuated, trading slightly lower at $2,250/t, while nickel decreased to $16,255/t. Elsewhere, lead dropped by 3%, standing at $1,965/t, and zinc declined to $2,635/t.
Despite gold's typical role as a safe-haven asset, the plummet in global equities led investors facing margin calls to sell their profitable gold positions to cover their stock market losses. This liquidation pressure caused a drop in gold prices alongside the decline in equities. Gold stood at $2,408/oz, while silver plummeted to $27.3/oz. Recession fears also pushed down oil prices, with WTI and Brent crude trading at $72.9/bbl and $76.2/bbl, respectively.
All price data is from 05.08.2024 as of 17:30
