According to the Finance Network APP, global stock markets plummeted on Monday, with Japan's Nikkei 225 index closing down 12%, its biggest one-day drop since the 1987 Wall Street crash. The S&P 500 Index had its biggest one-day drop since 2022.

For the first time since July 2022, the yield on 2-year US Treasuries was lower than that on 10-year Treasuries. Previously, the yield curve of US bonds had been inverted for a long time, breaking the record for the longest time in history, which tested its reputation as an early warning indicator of economic problems. The US stock market had been hitting new highs until mid-July this year. FXLive analyst Adam Button said that since 1955, the inverted yield curve has had a good record in predicting a recession in the US economy. However, it is not the inverted curve that really indicates the arrival of a recession, but the curve returning to normal. We can imagine it as a storm forecast, the inversion means the storm formation, the release of the inversion means the storm landing, especially in the bullish period dominated by the front end. We will not see a recession until the data shows it, but the market is definitely contracting. In addition to the slope of the curve, the yield on 2-year US Treasuries fell 20 basis points, nominally 170 basis points lower than the fed funds rate. This situation would not happen if there were no real economic problems.

At the close, the Dow Jones Industrial Average fell 1033.99 points, or 2.60%, to 38703.27. The Nasdaq fell 576.08 points, or 3.43%, to 16200.08. The S&P 500 Index fell 160.23 points, or 3.00%, to 5186.33. Apple (AAPL.US) fell 4.82%, its worst one-day performance since September 2022, to $209.27. Nvidia (NVDA.US) fell 6.36%, Google A (GOOGL.US) fell 4.45%, Tesla (TSLA.US) fell 4.23%, Amazon (AMZN.US) fell 4.1%, Microsoft (MSFT.US) fell 3.27%, and Meta (META.US) fell 2.54%.

Major European indices fell across the board, with Germany's DAX30 down 1.7%, the UK's FTSE 100 down 2.1%, France's CAC40 down 1.6%, and the European Stoxx50 down 1.8%.

The Nikkei 225 index plunged 12%, the Indonesian Jakarta Composite Index fell 3.38%, and the Vietnamese VN30 index fell 3.82%.

COMEX gold futures fell 0.72% to $2,452.1 per ounce; COMEX silver futures fell 3.63% to $27.36 per ounce.

Bitcoin fell more than 4.8% to $62,133.3 per coin; and Ether fell more than 6% to $3005.1 per coin in the crypto markets.

US WTI crude oil futures fell 0.8% on Monday. Concerns about a US economic recession continued to put pressure on oil prices. NYMEX West Texas Intermediate crude oil futures for September delivery fell 58 cents, or 0.79%, to settle at $72.94 a barrel.

London metals fell, with LME copper down more than 1.84%, LME tin down more than 2.3%, LME aluminum down $14, LME zinc down $20, and LME lead down more than 4.5%.

Macro news

US service sector activity expanded in July and corporate sentiment remained generally positive. The Institute for Supply Management (ISM) said economic activity in the service sector expanded somewhat, with this trend only interrupted three times since the early stages of the pandemic, but interrupted twice in the past four months. The services PMI was 51.4, the 47th time in 50 months that it has expanded. Steve Miller, chairman of the ISM Service Industry Business Survey Committee, said the rise in the composite index in July was the result of a 5-point increase in the average business activity, new order, and employment indexes, while the supplier delivery index fell 4.6, which partially offset the increase. Respondents again said rising costs were affecting their business, but were generally positive about the activity, expecting it to remain stable or gradually expand. Respondents remain cautious about the upcoming presidential election, with one respondent expressing concern about possible tariff increases. Many respondents noted that supply chain performance had returned to stability despite rising costs.

Chicago Fed President Austan Goolsbee: The Fed won't overreact. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, reiterated in a media interview on August 5 that the central bank's mission is not to react to single-month weak employment data, and added that market volatility is far higher than the Fed's actions. Goolsbee said there are some warning indicators, such as increased consumer loan defaults, but economic growth remains at a 'fairly stable level.' 'Employment data was weaker than expected, but doesn't look like a recession. I do think you need a forward-looking perspective on the direction of the economy to make decisions,' he said, emphasizing that the monthly non-farm employment figure has an error margin of 0.1 million, so caution is needed to draw major conclusions.

UBS: Now expects the Fed to cut rates by 100 basis points this year. UBS is now forecasting that the Fed will cut rates by 100 basis points this year, up from a previously predicted 50 basis points. In its report, UBS said that unless the August employment report performed well, UBS believed the Fed would start its easing cycle at its September meeting and cut rates by 50 basis points. 'Our basic judgment remains that the US economy will avoid a recession and that the pace of growth will remain close to 2%. With rates at a 23-year high, the Fed has sufficient flexibility to support the economy and markets,' UBS emphasized, noting that overall household finances are in good shape, real income is rising, average debt service costs are still lower than historical averages, and total net wealth has increased 37% since the start of the pandemic.

Sahm, creator of the Sahm Rule: the US economy has not yet fallen into a recession but is close. Claudia Sahm, former economist with the Federal Reserve, said that although the United States has not yet fallen into a recession, it is 'alarming;y close to one.' She expects that Fed policymakers may need to readjust their policy to account for the increasing risks. 'The increase in the unemployment rate matches that of the beginning of the recession,' Sahm said of the unexpectedly rising unemployment rate in last Friday's employment report on Bloomberg Surveillance on Friday. 'We may not have reached that point yet, but it is becoming increasingly close, which is worrying.'

Goldman Sachs strategist: Investors should cut exposure and hedge risks under heavy stock market pressure. Tony Pasquariello, global head of Goldman Sachs' hedge fund business, said that as US stocks continue to fall, investors should hedge their risk exposure even if they have high-quality assets. Pasquariello wrote in a report to clients: 'Sometimes you have to step on the gas, sometimes you have to step on the brakes, and I tend to drive with less exposure'. He added that it is difficult to imagine August as one of the months when investors should take on significant portfolio risk. On the other hand, share repurchases should be meaningful in August,'I think the next month will be a balancing process with no significant deviations,' he wrote. If we have to choose between being long high-quality assets and hedging, or further reducing core investment portfolio risks, Pasquariello leans towards the former.

HSBC strategist: Models show that the stock market will fall further. HSBC said that its stock cycle model indicates that the market is now in a 'sell-off' mode, which usually lasts for a month, with the S&P 500 index averaging a 10% decline. Strategists, including Duncan Toms and Max Kettner, wrote that the general market correction still has room to develop. They said that the 'sell-off' period is often relatively short and may provide an opportunity to increase risk exposure tactically, but it is not yet time to buy on dips as sentiment indicators suggest it is too early. The model has issued its most pessimistic signal since October 2022.

Raising rates at the wrong time: Japan's stock market collapse provokes criticism of the central bank. The Bank of Japan's last week's monetary policy tightening has drawn criticism, triggering a historic plunge in Japan's stock market and exacerbating global market turbulence. This could put any further rate hike plans on hold. 'The Bank of Japan needs to be mindful of economic data and the market,' said Nobuyasu Atago, chief economist of Rakuten Securities' economic research institute and a former BOJ official. 'Even in the face of weak economic data, the Bank of Japan is still raising interest rates, indicating that it is not paying attention to the data.' BOJ Governor Haruhiko Kuroda reiterated last week that the central bank decided to raise rates because economic and inflation data indicated that the situation was in line with previous expectations. He also said that rates would continue to rise as long as this trend continued. However, the most severe sell-off in Japan's stock market in decades has led analysts to consider the central bank premature in pulling the trigger, and many are adjusting their expectations.

[Individual stock news]

Taiwan Semiconductor (TSM.US) is Goldman Sachs' top pick for stocks. Taiwan Semiconductor has been named Goldman Sachs' top pick as the bank believes the company's valuation is attractive after its recent weakness. Analyst Charlie Chan wrote that we are bullish on the quality and defensive nature of Taiwan Semiconductor throughout a long semi-down cycle. The confirmation of price increases and sustained capital expenditure on artificial intelligence should be key catalysts. She also said Taiwan Semiconductor should be able to achieve a gross margin of more than 55% in 2025 and gradually approach 60% between 2028 and 2030 after reaching economies of scale at its offshore fabs. Currently, Taiwan Semiconductor has fallen more than 20% since its peak in July.

Google (GOOG.US, GOOGL.US) lost a lawsuit in the US Department of Justice over default search engines. A federal judge ruled on Monday that Google's payments to make its search engine the default search engine for smartphones violated US antitrust laws, representing a key victory for the US Department of Justice. Judge Amit Mehta in Washington said that Alphabet Inc.'s Google payment of $26 billion actually prevented any other competitors from succeeding in the market. Antitrust enforcers claim that Google illegally maintains a monopoly on online search and related advertising. The government agency said that Google has paid billions of dollars to Apple, Samsung and other companies for decades, making it the default search engine for smartphones and web browsers. This helped Google become the most commonly used search engine in the world and generate more than $300 billion in annual revenue, most of which comes from search ads.