Market Update - 10th August 2024

Written by William Cooper

Domestic

It has been a tumultuous last few weeks for markets worldwide, as chaos erupted over fears of a U.S. recession caused all major worldwide indices to plummet in some of the largest single day losses seen since the beginning of COVID. Over 6.5 trillion USD worldwide were wiped off markets, however what could be considered an overreaction has since begun to correct itself as markets have been trending back upwards since the dust has settled.

The ASX slid 3.02% for the fortnight, as all industries recorded losses, aside from utilities which were the sole outlier. Whilst macroeconomic factors are the primary reason for general market downturn, Materials are suffering from weaker commodity prices, particularly iron ore, whilst energy similarly crumbled due to oil prices hitting 7-month lows during the week. The tech heavy Nasdaq entered a technical correction on Friday’s session and continued its decline with the rest of the market over the weekend. IT stocks in Australia followed suit and saw major selloffs in response.

The RBA again met on Tuesday and decided to maintain the current cash rate of 4.35%. Inflation continues to prove persistent, and currently has sat above the midpoint of the 2-3% target for 11 consecutive quarters. The RBA estimates that the gap between supply and demand is larger than first thought. Demand has been forecast to rise, whilst the capacity to meet this demand is weaker than initially expected. Rate cuts have been ruled out for this year and are unlikely to be seen until late 2025 given current economic conditions.

International

Whilst the world economy is demonstrating losses across every major index, these figures certainly are not as severe as what they were at the low point on Monday. The Japanese Nikkei appeared to be the hardest hit index, a staggering 12.4% single-day loss, the largest fall since 1987. This was exacerbated by a hike in interest rates by the Bank of Japan, who are looking to tackle rising inflation, and to boost the value of the Yen against the USD. However, the woes disappeared as the Nikkei rebounded 10.23% the following day returning majority of the lost market cap.

All eyes were on the U.S. after alarm bells wrang over the strength of their economy, which was heightened by an unexpectedly weak jobs report which helped drive selloffs. This came a day after the Fed decided to maintain the cash rate, prompting critics to accuse the central bank of waiting too long to cut rates. The Nasdaq was further dented by a fall in Apple stocks, which became pressured after Warren Buffet’s Berkshire Hathaway scaled back its vast stake in the giant.

Most indices globally are trending upwards showing strong signs of correction, but the current global economic climate is still very volatile and is not showing any signs of predictability in the near term.