Sell-off accelerates as fear of global recession grows   

03 October 2019 : Global equity markets fell sharply on Wednesday with the Dow Jones Industrial Average declining 494 points bringing its two-day decline to more than 800 points. On the other side of the Atlantic, the UK’s FTSE 100 fell 3.2%, making it the steepest one-day decline since January 2016. Meanwhile, the Nikkei 225 in Japan and ASX in Australia both dropped more than 2% today.

Traders driven by quantitative strategies are also seeing an ugly picture with all US three major indices falling below their 50 and 100-day moving averages, which is usually interpreted as more turbulence ahead.

Bonds have been in strong demand so fixed-income investors who have spent almost one-year accumulating positions in their portfolios, have been waiting for this moment,  although as usual, the sell-off in stocks has been later than anticipated.


The Trigger

The selloff kicked off on Tuesday after US ISM Manufacturing PMI showed activity fell to the lowest level in a decade. It then accelerated after the ADP jobs report indicated that the pace of hiring is slowing.  Reports that the US will open a new front in its trade war with Europe after WTO ruling also rubbed salt into the wound. While it’s too early to conclude that last year’s fourth quarter turmoil which led to a 19% decline in the S&P 500 will repeat itself, the list of risks continues to grow.

Source: FXTM Chief Market Strategist, Hussein Sayed

Reporting for EasyKobo on Thursday , 3 October 2019 in Lagos, Nigeria

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