Uncertainty on the stock market continues – share prices continue to tumble
Published: Monday, Aug 5th 2024, 12:20
Updated At: Tuesday, Aug 6th 2024, 01:59
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The correction seen on the international financial markets in recent days is continuing at the start of the week - including on the Swiss stock exchange. Riskier investments such as equities are being thrown out of portfolios on a large scale and safe havens such as the Swiss franc or gold are increasingly being sought.
Last week's sell-off was triggered by weak US economic data. In particular, the weak US labor market report at the end of the week caused sentiment to plummet. After the US Federal Reserve left interest rates untouched on Wednesday, but signaled an interest rate turnaround for September, many market participants feared that it might have waited too long to cut interest rates for the first time.
Added to this are the geopolitical tensions. There is a threat of further escalation, particularly in the Middle East, which will lead to rising oil prices and therefore pose an additional threat to the global economy.
The Swiss benchmark index SMI lost more than three percent at times to 11,455 points at the start of the week, its lowest level since May. Shortly before midday, it at least managed to limit the losses somewhat and was still down 2.73% at 11,546 points. It had already slumped by 3.6% on Friday, which corresponded to the biggest daily loss since January 2022.
This means that the Swiss stock exchange is moving downwards more or less in step with its European counterparts. The German Dax and the French Cac-40 also fell by more than 2 percent. In Asia, the Japanese Nikkei even slumped by a good 12 percent. And globally traded US stock futures also point to a continuation of the downward trend in the USA.
Markets in a state of great uncertainty
The VSMI volatility index also shows that the markets are very unsettled. The fear barometer of the stock market shoots up by almost a quarter to over 20 points. The VSMI had already risen by around a third on Friday. It has thus doubled since the beginning of the year. The last time there were similarly sharp rises was in March 2023, when the markets were in a state of panic due to the banking crisis in the US and the emergency rescue of Credit Suisse by UBS.
But investors' fears can also be seen in the foreign exchange and crypto markets. The Swiss franc is increasingly sought after as a safe haven. In the course of trading, the euro/franc pair fell at times to its lowest level since the minimum euro exchange rate was lifted in January 2015. At the same time, the cryptocurrency Bitcoin accelerated its slide and slipped below the 50,000 dollar threshold at times.
No recovery expected soon
Most market participants expect the market to remain volatile in the near future. This is because fears of recession are spreading in the USA. However, the latest data from the eurozone does not exactly inspire confidence either. The S&P Global purchasing managers' index has fallen for the second month in a row.
It remains to be seen how long this deterioration in sentiment will affect share prices. In general, it should be borne in mind that the summer months are traditionally rather difficult terrain, according to a commentary.
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