Behind the crypto market crash: Concerns about economic prospects and expectations of a Fed rate cut have declined

Preface

The US stock market suffered a heavy fall yesterday, with the Dow Jones, S&P 500 and Nasdaq all falling sharply, with the Nasdaq falling the most since August 5. The crypto market was also dragged down by the stock market, with nearly $200 million liquidated across the network. Golden Finance sorted out the relevant factors of the market crash to help investors understand market dynamics in a timely manner.

Manufacturing data heightened concerns about the direction of the economy

The Purchasing Managers' Index (PMI) for August released by the Institute for Supply Management (ISM) was 47.2, lower than market expectations and below the 50 boom-bust line for the fifth consecutive month, only briefly rising above 50.3 in March this year. As an important indicator for measuring the prosperity of the manufacturing industry, the continued decline of PMI indicates that US manufacturing activities are still in a state of contraction and economic growth is facing pressure.

The survey by the Institute for Supply Management (ISM) showed that although U.S. manufacturing activity was still shrinking in August, the rate of contraction slowed down compared with the previous month. Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee, said that despite this, demand for manufacturing remained weak, output continued to decline, and companies were cautious about investment and increasing inventory due to the uncertainty of the Federal Reserve's monetary policy and the U.S. election. However, Fiore also pointed out that the current PMI index, although below 50, is still above 42.5, indicating that the overall economy is still expected to maintain expansion.

After the release of the ISM manufacturing PMI data, the three major US stock indexes fell, with the Nasdaq index falling the most, by more than 2.5%. In addition, the manufacturing sub-index also sent a new signal that the job market may continue to be strong, which is in line with the expectations of the non-farm payrolls report to be released this week.

Market expectations for the Fed's rate cut remain cautious

According to the latest economic data, the second quarter GDP growth rate of the United States was revised up to 3.0%, higher than previously expected and the growth rate in the first quarter. At the same time, the number of initial unemployment claims fell by 2,000 after seasonal adjustment , indicating that the labor market situation has improved. However, despite the good performance of economic data, the market's expectations for the Fed's interest rate cut are still cautious. Although some economists believe that the current data supports a 25 basis point rate cut, the market's expectations for a 50 basis point rate cut have declined. In addition, the US dollar index rose slightly after the release of the economic data, indicating that the market still has some concerns about the economic outlook.

The Bank of Japan 's interest rate hike is also a factor that cannot be ignored

The governor of the Bank of Japan recently reiterated his stance of continuing to raise interest rates, believing that the current economic environment is still relatively loose. At the same time, the head of fixed income at T. Rowe Price warned that the Fed's possible rate cuts and the Bank of Japan's further tightening policy could lead to market turmoil again, and the market crisis in August may just be a harbinger.

summary

Market volatility has increased recently, with the VIX panic index soaring by nearly 40%. Market data and analysis may confuse investors, and the weakness of the ISM manufacturing PMI has exacerbated market concerns about the outlook for the US economy. Both US stocks and the crypto market have fallen. Investors should pay close attention to the direction of the Federal Reserve's monetary policy and changes in the global economic situation.