{"id":292459,"date":"2024-08-06T06:02:34","date_gmt":"2024-08-06T06:02:34","guid":{"rendered":"https:\/\/www.thetruthseeker.co.uk\/?p=292459"},"modified":"2024-08-07T07:22:48","modified_gmt":"2024-08-07T07:22:48","slug":"bets-on-emergency-us-rate-cut-ramp-up-as-recession-fears-grow","status":"publish","type":"post","link":"https:\/\/www.thetruthseeker.co.uk\/?p=292459","title":{"rendered":"Bets on emergency US rate cut ramp up as recession fears grow"},"content":{"rendered":"

The Telegraph \u2013 Aug 5, 2024<\/strong><\/h1>\n

Investors have ramped up bets that the US Federal Reserve will be forced into an emergency interest rate cut to support the economy as fears of recession grow.<\/p>\n

A stock market sell-off that began on Wall Street on Friday spread around the world on Monday, with heavy selling from Tokyo to London.<\/p>\n

Shares plunged and bonds rallied amid growing fears that the world\u2019s biggest economy is heading for recession and concern that an AI-fuelled stock bubble has burst.<\/p>\n

The tech-heavy Nasdaq Composite plummeted by as much as 6.4pc as Wall Street opened – its worst daily drop since the start of the pandemic – extending losses after a 2.4pc drop on Friday. The broader S&P 500 sank by as much as 4.2pc.<\/p>\n

It followed sharp sell-offs in Europe earlier in the day, where the FTSE 100 closed down 2pc to register its biggest drop in more than a year. Overnight, Japan\u2019s stock market suffered its heaviest loss since 1987.<\/p>\n

The panic began at the end of last week after weaker-than-expected US economic data triggered fears that the Fed had left it too late to lower interest rates. The central bank held interest rates at 23-year highs of 5.25pc to 5.5pc last week, though chairman Jerome Powell indicated that the first cut since lockdown in 2020 was likely in September.<\/p>\n

Frenzied bets on rate cuts at one point on Monday implied a 60pc chance that the central bank would be forced to announce a quarter of a percentage point interest rate cut within a week in response to the global loss in confidence.<\/p>\n

Bitcoin fell more than 5pc as risk aversion spread throughout the market.<\/p>\n

Large swings in market prices are likely to have been exaggerated by the fact it is August, a time when many money managers are on holiday. It means prices are being dictated by thinner trading volumes, which mean prices can swing more easily.<\/p>\n

The scramble to sell triggered a series of outages of retail investor trading platforms, including Charles Schwab and Fidelity.<\/p>\n

Both companies later said they had resolved any issues, while the odds of an emergency rate cut also ebbed to about 30pc.<\/p>\n

Economists warned that an emergency interest rate cut by the Fed risked triggering more market turmoil in financial markets.<\/p>\n

Michiel Tukker, senior European rates strategist at ING, said: \u201cThe question would then become: what does the Fed know that we don\u2019t? And you don\u2019t want to create the illusion that things are even worse than previously thought.\u201d<\/p>\n

Philip Shaw, chief UK economist at Investec, said a sustained sell-off could force policymakers to act.<\/p>\n

He said: \u201cMarkets are falling but not seizing up. We are mindful that this can change, though, and signs of a threat to financial stability certainly would prompt central bank action. What matters is financial market confidence, which is somewhat intangible and therefore difficult to predict.\u201d<\/p>\n

Losses on the US stock market eased as the trading session went on after a closely-watched survey suggested fears of a US recession may be overblown.<\/p>\n

The Institute for Supply Management (ISM) said its purchasing mangers\u2019 index (PMI) for the services sector climbed to 51.4 in July, from 48.8 in June. Anything above 50 indicates growth.<\/p>\n

However, the data followed weak manufacturing figures on Friday and Stephen Brown at Capital Economics said this was \u201chistorically consistent with GDP stagnating at best\u201d.<\/p>\n

Michael Gapen, US economist at Bank of America, said the panic triggered by a manufacturing slowdown was overblown, but added that the Fed was still likely to embark on a more sustained campaign of rate cuts.<\/p>\n

He said: \u201cWe are forecasting a rate cut cycle that begins in September, with 25bp [basis point] rate cuts every quarter until a terminal rate of 3.25pc to 3.5pc in mid-2026.<\/p>\n

\u201cAggressive rate cuts of 50bp or more are done on an emergency basis, as are intermeeting actions. Could we get there? Sure. But we are not there yet.\u201d<\/p>\n

Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A stock market sell-off that began on Wall Street on Friday spread around the world on Monday, with heavy selling from Tokyo to London.<\/p>\n","protected":false},"author":39262,"featured_media":48984,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[66],"tags":[],"class_list":["post-292459","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-Economics"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/292459","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/users\/39262"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=292459"}],"version-history":[{"count":1,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/292459\/revisions"}],"predecessor-version":[{"id":292460,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/292459\/revisions\/292460"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=\/wp\/v2\/media\/48984"}],"wp:attachment":[{"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=292459"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=292459"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thetruthseeker.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=292459"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}