Wedbush‘s Dan Ives warns of a brutal day for U.S. markets and tech stocks, following a historic sell-off in Nikkei and the unwinding of the Yen carry trade.
What Happened: On Monday, Ives took to X to express his concerns about the potential impact on U.S. markets and tech stocks due to the historic sell-off in Nikkei and the unwinding of the Yen carry trade.
“Nikkei historical sell-off as Yen carry trade unwinds in brutal fashion and global economic/geopolitical jitters will cause a nasty day for US markets and tech stocks. We keep same tech playbook we used during March 2020 Covid sell-offs and other macro panic events last few years,” he wrote.
The analyst’s post comes in the wake of a “bloodbath” in Asian and European markets, with Japan’s index crashing by 13%. This was triggered by the unwinding of Yen carry trades, a strategy where investors borrow yen at very low interest rates and invest in another currency in a country with a higher rate of return.
Why It Matters: The sell-off in Nikkei and the unwinding of Yen carry trades have sent global markets into a tailspin. The U.S. stock markets closed lower on Friday, with the Nasdaq Composite entering correction territory. A disappointing jobs report has fueled recession fears, with investors signaling a shift in sentiment where bad economic news is viewed as a genuine concern rather than a potential trigger for Federal Reserve easing.
As the first markets to open, the Australasian markets plunged hard, raising concerns about the potential for a longer-term impact on the market. The unwinding of the Yen carry trade comes after the Bank of Japan maintained a negative interest rate for about eight years until March, and at a very nominal 0-0.1% until late-July, marking the first hike in 17 years.
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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