US equity futures trimmed gains and European stocks fell into the red. Treasuries pulled back, with the 10-year yield on track for its first rise in nearly two weeks. Traders are scaling back expectations that the Federal Reserve will intervene with early interest rate cuts.
Reflecting widespread market anxiety, investors are scrambling to hedge their portfolios against a major crash. Wall Street’s “fear gauge,” the VIX index, remains at its highest level in almost two years.
Japan continues to be the focal point of volatility. The Topix index surged 9.3% after plummeting 12% on Monday. According to JPMorgan Chase & Co., the unwinding of the yen carry trade is only halfway complete.
“We don’t expect a lull in the coming days,” said Christopher Dembik, senior investment adviser at Pictet Asset Management. He noted that the unwinding will continue to trigger margin calls and losses, with a sustained stock recovery dependent on central bank measures and big-tech earnings. “I’m expecting the month of August to be red-tainted.”
Despite the turbulence, there are signs of calm. Historically, buying the S&P 500 after a 5% drop has proven profitable over the past four decades, Goldman Sachs Group Inc. strategists noted.
“The violent market moves over the last few sessions, in our view, present a buying opportunity,” said Mohit Kumar, chief economist for Europe at Jefferies International Ltd.
In premarket trading, Palantir Technologies Inc. saw its stock surge as much as 13% after the business raised its annual outlook, driven by strong demand for its artificial intelligence software.
In commodities, oil hovered near a seven-month low as production halts at Libya’s biggest field shifted focus back to the Middle East. Gold steadied after Monday’s global selloff, which saw some traders liquidate holdings to cover margin calls.
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