Recession fears trounce rate cut cheer in latest market selloff

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Volatility gauges continue to rise globally

Mounting unease over the U.S. economic outlook and a seasonally weak month for stocks have created another perfect storm of global market volatility, leaving investors scrambling for protection and fearing another round of currency chaos.

Wall Street’s S&P 500 share index fell over 2% on Tuesday, while Japan’s broad Topix share gauge plunged 3.7% on Wednesday in its biggest daily drop since the Aug. 5 market rout and European stocks tumbled. Echoing August’s pain, highly valued tech stocks that investors have crowded into are taking a beating. AI heavyweight Nvidia slid 9.5% on Tuesday, the deepest ever single-day market value decline for a U.S. company. Dutch semiconductor equipment supplier group ASML Holdings slumped around 5% on Wednesday.

“You need to decide now whether you like credit and bonds or equities,” said Lombard Odier’s Ielpo, who added he had bought government bonds over the last four weeks. A broad index of high-yield corporate bond performance has also risen 2.5% since dropping briefly in early August. Short-term speculators have a roughly $9 billion bet on the dollar falling against other major currencies, a position that could spark more foreign exchange swings if proven wrong, or further weaken U.S. stocks if it is accurate.

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