U.S.-Led Stock Market Decline, Focus on Employment-Related Data This Week
The U.S. stock market had a turbulent reopening after the long weekend, with Nvidia plunging by 9.5%. While the company’s stock is not part of the Dow Jones Industrial Average, the Dow still fell sharply, dropping 626 points (-1.51%), and the VIX (fear index) surged. This movement spread to Japanese stocks, increasing the risk-averse sentiment.
The yen is trading heavily on the upside, with USD/JPY temporarily falling to the high 144-yen range. The yen’s appreciation is intensifying selling pressure on Japanese stocks, and the risk-off sentiment is creating a ripple effect. In the cross-yen pairs, EUR/JPY dropped to the 160-yen range, GBP/JPY to the 190-yen range, and AUD/JPY to the 97-yen range.
Focus of the Week: U.S. Employment Report
The main event this week is the U.S. employment report on Friday. In the previous report, the unemployment rate unexpectedly rose from 4.1% to 4.3%, and non-farm payroll growth halved from 206,000 to 114,000. This triggered a global stock market decline, and caution is in the air regarding this upcoming report. Market forecasts suggest an unemployment rate of 4.2% and payroll growth of 165,000, but given the low accuracy of employment forecasts, caution is warranted.
U.S. Employment-Related Data This Week
Ahead of the employment report, this week will see several employment-related indicators. Today, the July JOLTS job openings report is set to be released, with market expectations at 8.1 million, down from the previous 8.184 million. Given the cautious market sentiment, any deviation from expectations could trigger a sharp reaction.
Other Economic Indicators and Events
Other economic indicators scheduled for release this week include non-manufacturing PMIs from France, Germany, the Eurozone, and the UK, the U.S. MBA mortgage applications index (for the week of 8/24 – 8/30), U.S. trade balance (July), U.S. factory orders (July), U.S. durable goods orders (final) (July), Canada’s international merchandise trade (July), and the Bank of Canada’s interest rate decision (September). The Bank of Canada is expected to cut its policy rate from 4.50% to 4.25%.
On the event front, Banque de France Governor Villeroy de Galhau will participate in an event, and Bank of Canada Governor Macklem and Senior Deputy Governor Rogers will hold press conferences after the monetary policy announcement. The Federal Reserve’s Beige Book will be released in the latter part of the NY session.
Nvidia and U.S. Stock Market Movements
Nvidia’s stock plummeted after the U.S. Department of Justice issued a document submission order for an antitrust investigation, wiping out $278.9 billion in value. This marks the largest single-stock loss in U.S. market history and has been a major driver of the sharp drop in U.S. stocks. With the effects of this still unfolding, the risk-off sentiment is expected to remain strong, making USD/JPY vulnerable to selling. Gold buying could also become an attractive option.
