A man looks at an electronic boarddisplaying stock prices of the Nikkei 225 listed on the Tokyo Stock Exchange in Tokyo on April 30, 2024.
Kazuhiro Nogi | Afp | Getty Images
Investors on Monday turned to safe-haven assets as a global stock sell-off deepened, following weaker-than-expected U.S. jobs data at the end of last week.
The disappointing jobs report spurred investor fears that the Federal Reserve made a mistake last week when it kept interest rates unchanged, and that the world’s largest economy is headed toward a recession.
The stock sell-off has also been exacerbated by volatility in some of the major earnings and a more hawkish Bank of Japan, which has led to speculation that the popular yen “carry trade” has imploded over a short-term basis. A “carry trade” takes place when investor borrows in a currency with low interest rates, such as the yen, and reinvests the proceeds in a currency with a higher rate of return.
On Monday morning, the Swiss franc strengthened 1.2% against the dollar to trade at 0.847 against the greenback, or its strongest level since January this year.
Similarly, U.S. Treasury yields extended their fall to notch a one-year low. At 2:41 a.m. ET, the yield on the 10-year Treasury was down by over eight basis points to 3.7099%. The 2-year Treasury yield was last trading at 3.7315% after falling by around 14 basis points. The yield on Japan’s 10-year government bond also dipped to 0.204%.
Gold futures climbed 0.38% to trade at $2,479.2 per ounce.
The buying was in sharp contrast to the selling seen in the stock markets. U.S. stock futures fell early Monday, with the Dow Jones Industrial Average futures declining by some 600 points by 4 a.m. ET, or roughly 1.5%. S&P 500 futures and Nasdaq-100 futures dipped 2.8% and 4.9%, respectively.
Japan stocks confirmed a bear market in Asia overnight. The 12.4% loss on the Nikkei — which brought it to close at 31,458.42 — marked the worst day for the index since the “Black Monday” of 1987. The loss of 4,451.28 points on the index was also the largest decline in terms of points in its entire history.
In Europe, the regional Stoxx 600 index was 2.34% lower, with all sectors and major regional bourses trading in the red. Tech stocks shed as much as 5% before paring losses slightly to trade down 2.8%. Mining stocks also lost 3.65%, while banks were 3.22% lower.
Ted Alexander, chief investment officer at BML Funds, said that the current volatility in markets has “been a long time coming,” and that it was not a reason to panic.
“Everyone’s been expecting it for a while, [it’s] great for active managers,” he told CNBC via email, adding that the shake up may actually bring equity investors back if stocks offer better value.
“Stock markets aren’t cooked yet. Don’t abandon some exposure to tech and growth,” Alexander said.
—CNBC’s Sarah Min and Lim Hui Jie contributed to this report