Black Monday was caught off guard and caught global investors by surprise. From Hong Kong stocks to European stocks to the US stocks that opened later, global stock markets collapsed one after another. Even the oil market and cryptocurrency were not spared. Behind this, the US Treasury Secretary said that the debt panic index rose rapidly. But the risk may not only lie in debt default, the epidemic continues to raging, economic recovery is difficult to see, and the liquidity turning point is approaching, the market panic is evident.
The Nasdaq fell more than 2%
On the 20th local time, in the turbulent and plummeting market, global stock markets were full of grief. On Monday, the three major US stock indexes collectively opened lower, Dow Jones Index opened 536.70 points lower, or 1.55%; S&P 500 opened 72.42 points lower, or 1.63%; Nasdaq Composite Index opened lower by 291.19 points . After
, the Dow fell nearly 3% intraday. As of the close of the day, although the decline narrowed, it still showed a state of annihilation.
The Dow Index closed down 614.41 points, or 1.78%, to 33,970.47 points, the largest one-day drop since July 19; the S&P 500 index fell 75.26 points, or 1.70%, to 4,357.73 points, a record of 4,357.73 points since May 12. The worst single-day performance since the day; the Nasdaq fell 330.06 points, or 2.2%, to 1,4713.9 points, below the key technical level of the 50-day moving average.
Specific to individual stocks, large technology stocks, financial stocks, and oil stocks fell the most. Apple fell more than 2%, Tesla fell nearly 4%, Amazon fell more than 3%, and JP Morgan Chase , Morgan Stanley also fell 3%.
is not limited to US stocks. Earlier in the day, the Hong Kong stock market plunged. The Hang Seng Index plunged more than 1,000 points during the intraday session, a drop of more than 4% at one time.Immediately afterwards, European stock markets opened lower across the board. The German DAX index fell more than 3% to close at 15,128 points, the lowest in 4 months; the French CAC40 index fell 1.74% to 6455.8 points.
There is no end to the nest, and international oil prices and cryptocurrencies have also plummeted. On the same day, U.S. oil and oil distribution fell by more than 2%; Bitcoin fell by more than 9% at one time. Within 24 hours, more than 250,000 people in the cryptocurrency market liquidated their positions and the amount of liquidated positions exceeded 8.6 billion yuan.
In this "Black Monday", global market panic continues to spread, triggering a lot of selling. At the same time that the stock market plummeted, the VIX index, known as the "panic indicator", rose nearly 30% during the intraday session.
According to Aslam, the chief market analyst of AvaTrade , "the market decline is caused by a variety of reasons, including multiple factors such as the decline in earnings expectations and the uncertainty brought about by changes in monetary policy."
It is worth mentioning that just the day before, on the 19th local time, US Treasury Secretary Yellen issued a warning that if the US Congress does not quickly raise the federal government’s debt ceiling or suspend it in effect, the federal government in October this year There may be a debt default, which is likely to trigger a "historical financial crisis."
This may have ignited the risk aversion of investors. On that day, bond prices rose, and the 10-year U.S. Treasury bond yield fell 4 basis points to 1.329%.
Debt Fuse
Although the plunge across the board was a bit caught off guard, Wall Street seemed to have anticipated it.
Earlier in September, Morgan Stanley, Citigroup , Deutsche Bank and Bank of America and many other institutional analysts published reports warning of the current risks of the US stock market. Since the beginning of this year, the S&P 500 Index has set a record 54 times, the most since 1995 in the same period. Some analysts said,They believe that the possibility of a correction is increasing, or at least the return is flattening.
And Yellen's statement is like a fuse, directly igniting all risks. On the same day, Yellen emphasized in an article published on the " Wall Street Journal" website that the US government debt default is likely to trigger a "historical financial crisis", exacerbating the economic damage caused by the new crown epidemic; debt defaults may also trigger interest rates Soaring, sharp decline in stock prices and other financial turmoil. In addition, the current US economic recovery may be reversed into recession, losing billions of dollars in economic growth and millions of jobs.
This may not be alarmist. According to the cross-party budget bill passed by the U.S. Congress in 2019, the federal government’s debt ceiling was reinstated on August 1 this year after a two-year suspension.
Debt ceiling, that is, the maximum amount of debt set by the US Congress for the federal government to fulfill the payment obligations that have been incurred. If this "red line" is touched, it means that the US Treasury Department's borrowing authorization has been exhausted. At present, the debt of the US federal government has exceeded 28.7 trillion US dollars. In comparison, the full-year GDP of the United States in 2020 is US$20.93 trillion.
Looking back at the last debt issue, on August 5, 2011, given that the debt ceiling agreement reached by the US government and Congress lacked appropriate measures to maintain medium-term debt stability, credit rating agency Standard & Poor’s announced for the first time in history that the United States will be long-term The sovereign credit rating of was lowered from “AAA” to “AA+”, and the rating outlook is negative. Three days later, the S&P 500 and the Nasdaq fell 6.7% and 6.9% respectively in a single day, and the global stock market suffered a bloodbath.
Qianhai Kaiyuan Chief Economist Yang Delong pointed out that from an external perspective, it is the US debt crisis and the rising risk of . In addition, from the perspective of the Hong Kong stocks themselves, the Evergrande incident has had a relatively large impact on the financial industry and real estate, triggering panic selling and leading to a pressure on the market.
Although it is unclear whether this time will repeat the mistakes of ten years ago, the debt risk has indeed burned eyebrows. However, in the view of Dan Clinton, director of policy research at Strategas Research Partners, Wall Street is increasingly convinced that lawmakers will not resolve the debt ceiling soon.
According to the arrangement, the Democrats of the House of Representatives plan to hold a vote this week on the suspension of the debt ceiling and the temporary budget expenditure plan. Speaker of the House of Representatives Pelosi and Senate majority leader and Democrat Schumer issued a joint statement stating that the temporary spending plan will support the government's operation until December 2021, and the suspension of the debt ceiling will take effect until the end of 2022.
Focus on global central banks
Of course, the debt issue is only one of the concerns of investors. Art Hogan, chief market strategist at National Securities, said that anxiety about the debt ceiling has increased investor concerns about the new crown variant virus, inflation and the end of the Fed’s easing policy.
Right now, the epidemic in the United States is getting worse. According to the latest data from Johns Hopkins University , as of 8:30 am on September 21, Beijing time, more than 676,000 Americans have died from the new crown virus. This number has exceeded the estimated number of deaths in the Spanish flu 103 years ago.
Prior to August, US consumer confidence had dropped to its lowest level in a decade. The consumer confidence index released on Friday (September 17) in early September has rebounded, but it is still near a 10-year low. From this data, the American public believes that everything from personal finances to inflation and employment prospects is not very optimistic.
In the current complex environment where the epidemic is intertwined with economic issues, the world's attention is focused on the next direction of monetary policy. On September 21 and 22 local time, the Fed will hold a September interest rate meeting. And this meeting is very critical. The Fed will release its latest economic forecast and interest rate hike dot-map.
Although the time window for the Fed to issue the September Taper signal has been closed, the meeting may suggest that Taper will issue an announcement in November or December.
Among the 52 economists interviewed by Bloomberg, 67% of economists believe that the Fed will announce a reduction in bond purchases (Taper) in November, and 21% believe it will be in December. Economists generally believe that the Fed will maintain interest rates near 0% in 2022 and is increasing it by 50 basis points in 2023.
In addition to the Fed, this week there will be at least 11 central banks in the United Kingdom, Japan, Norway, etc., which will announce monetary decisions this week.
As for whether the stock market will be "ice" or "fire", different analysts have given different opinions. Tom Lee, former chief equity strategist at JPMorgan Chase and co-founder of Fundstrat Global Advisors, believes that despite the recent volatility, the long-term bull market outlook for the stock market is still good, and investors should not stop looking for buying opportunities because of the recent market turmoil. .
But there are also pessimistic voices. For example, the Morgan Stanley analyst team led by Michael Wilson emphasized that the US stock market plummeted by more than 20% seems to be a more real possibility.
In Yang Delong's view, the possibility of subsequent high-level fluctuations in US stocks is relatively high. Because of the expectation of monetary policy tightening, it may fall, but it is hard to say whether it will collapse.
"Now that global liquidity has tightened, inflationary pressures are relatively high, and overseas stock markets may also experience certain adjustment pressures. After all, they may have risen better before. In contrast, the overall valuation of A-shares is The valuation of overseas stock markets is relatively low, and the fourth quarter is another peak consumption season. In this case, the risk of A shares may not be so great." Yang Delong said.
Beijing Commercial Daily reporter Tang Yitian
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