‘Biggest Fear Is The Fear Of US Recession’: Steve Englander

Summary

Global markets are experiencing significant downturns due to a mix of poor US economic data, recession fears, and the Bank of Japan's unexpected rate hike. US markets closed with steep losses, influenced by weak job growth and rising unemployment rates. The Yen's appreciation is also causing turbulence in global financial markets, impacting risk assets and equities worldwide. Despite some hope for domestic flows in India, the outlook remains bleak with sectors like IT and metals expected to suffer. Specific stocks like SBI, Titan, and Delhivery reported mixed results amidst this challenging economic environment.

Takeaways

• 🌅 The morning market is expected to be turbulent, influenced by various global economic factors.
• 🌍 Global markets are experiencing a significant downturn, and India is likely to follow suit.
• 📉 U.S. markets had a rough close on Friday, with the Dow down over 600 points and NASDAQ down 2.5%.
• 💼 Poor U.S. economic data and weak jobs data for July are contributing to recession fears.
• 📈 Concerns are growing that the Federal Reserve may have kept interest rates high for too long, potentially harming the economy.
• 💻 Corporate results, especially from mega-cap companies like Intel and Amazon, have been disappointing.
• 🇯🇵 Rate hikes by the Bank of Japan have impacted global markets, particularly due to the unwinding of the Yen carry trade.
• 📊 The July nonfarm payroll data showed much lower job growth than expected and a higher unemployment rate of 4.3%, the highest since October 2021.
• 📉 Major U.S. indices are significantly down from their record highs, with bond yields plummeting due to recession fears.
• 🛢️ Crude oil prices have mildly recovered after sharp falls, but remain at low levels.
• 📉 Asian markets are also deeply in red, with the Nikkei and Topix down 20% from their highs.
• 🔄 The unwinding of the Yen carry trade is causing ripples in asset classes across the world, including equity markets.
• 💸 The ending of a long period of easy monetary policy in Japan is affecting global investors and markets.
• 🇮🇳 Indian markets and companies borrowing foreign money are likely to be impacted by the Bank of Japan's policy changes.
• 💡 The market's reaction to the unemployment rate increase and recession fears will shape future economic conditions.
• 🏦 Specific stocks like SBI and Titan are under scrutiny, with SBI showing mixed results and Titan dealing with high gold prices and fewer wedding dates affecting performance.

Q & A

What is the general mood of the global markets as described in the transcript?

The general mood of the global markets is negative, with significant declines across the US, Europe, and Asian markets. The markets are described as being in a 'sea of red' with a very tough morning ahead.

What factors are contributing to the negative market sentiment?

Several factors are contributing to the negative market sentiment, including poor US economic data, weak jobs data, fears that the Federal Reserve may have kept interest rates high for too long, below-expectation corporate results, and the impact of rate hikes in Japan.

How did the US markets perform on the Friday before the transcript?

On the Friday before the transcript, the US markets performed poorly. The Dow was down over 600 points, and the NASDAQ was down 2.5%. Recession fears worsened due to poor jobs data.

What specific data points from the US are causing concern?

The specific data points causing concern include the July nonfarm payroll data, which showed jobs grew by 114,000 compared to 1.79 lakhs in June, and the unemployment rate, which increased to 4.3%, the highest since October 2021.

What is the 'Yen carry trade' and why is it significant?

The 'Yen carry trade' involves borrowing in Japanese Yen at low interest rates and investing in higher-yielding currencies or assets. It's significant because the Bank of Japan's decision to raise interest rates has caused unwinding of these trades, leading to market volatility.

What impact did the Bank of Japan's decision have on global markets?

The Bank of Japan's decision to raise interest rates led to a stronger Yen, causing the unwinding of the Yen carry trade. This has contributed to the global market sell-off and increased volatility.

How have Indian markets been affected by global events?

Indian markets have also been affected, with expected declines and a tough trading day ahead. The impact of the unwinding Yen carry trade and global market sentiment are influencing Indian stock markets.

What are some examples of corporate results mentioned in the transcript?

Examples of corporate results mentioned include those from Intel and Amazon, which were below expectations, contributing to the negative market sentiment. Additionally, SBI and Titan in India had mixed results.

What is the general outlook for the US economy according to Steve Englander?

Steve Englander suggests that while a slowdown in the US economy is highly likely, the probability of a full recession is less than 50%. He notes that the data are mixed and not definitively pointing to a recession yet.

What role do interest rate expectations play in the current market situation?

Interest rate expectations play a crucial role. The market is concerned that the Federal Reserve may have kept rates high for too long, potentially harming the economy. There are also speculations about potential rate cuts, which could impact risk assets and market sentiment.