Monday Market Minutes: Falling knives

No guide from the American markets today and tonight because of the Independence Day long weekend, meaning no lead for worried investors heading into Tuesday’s trading.

That won’t worry Australian investors after a surge in futures trading Friday night – while Eurozone shares rose 0.1% on Friday and the US S&P 500 rose (helped by falling bond yields despite ongoing recession fears), ASX 200 futures jumped 96 points, or 1.5%, pointing to a very positive start on the ASX today.

That will be very different to Friday’s performance here when the ASX 200 fell 0.4% to 6,539.9.

In the US, the S&P 500 rallied 1.1% Friday but was off 2.2% for the week, ending at 3,825. Nasdaq added 0.9% Friday, but was down 4.1% for the week and the Dow rose 1.05% on Friday to be down 1.3% for the week.

Yields on 10-year US Treasury bonds tumbled to 2.89% after hitting lows of 2.80% late in the session on Friday. The close was the near six-month lows. US bond yields had been as high as 3.48% for the 10-year note and the sharp fall from then tells us how much investors fear a likely recession.

The fall in yields came as the value of the US dollar ended with a gain of 0.4% on Friday and just under 1% for the week.

The Aussie dollar ended at 68.15 US cents, down 1.8% for the week.

The usual start of month data drops around the world will impact trading this week, as will the lack of a lead tonight because of the US holiday weekend.

The fears of a recession or sharp slowdown continue to rise across markets.

Investors will assess the gloomy outlook from Bank of America Corp.’s Chief Investment Strategist Michael Hartnett who said in a note on Friday that he saw a “recession shock” beginning for markets following the worst first-half for the S&P 500 in more than 50 years,

Harnett wrote in a note on Friday that while expectations of aggressive rate hikes by the Federal Reserve are peaking, inflation expectations are not, and BofA’s bull and bear indicator remains at “maximum bearish” for a third week in a row.

Goldman Sachs strategists meanwhile said on Friday that the risk of a renewed sell-off in equity markets is still high as investors are only pricing a mild recession.

They said the upcoming earnings season is also going to be crucial for investors to gauge the impact of high inflation and weaker consumer sentiment on corporate profits.

For the week, Eurozone shares and Japanese shares both fell 2.1%. Chinese shares rose 1.6% having already had a 35% bear market.

Australian shares dropped 0.6% with gains in utilities, energy and industrials offset by falls in property, IT and telco shares.

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Meanwhile the carnage in cryptomarkets continues.

Shares in crypto brokerage house Voyager Digital plummeted as much as 40% after it announced Friday that it has temporarily suspended trading, deposits, withdrawals, and loyalty rewards.

It shares dropped to as low as 25 US cents before it rebounded to about 33 US cents at market close.

The company had last week issued a notice of default to Three Arrows Capital, formerly one of the most active crypto hedge funds, after it defaulted on a loan to Voyager of about $US666.7 million, including 15,250 bitcoin, or about $US297 million based on bitcoin’s recent price, and $US350 million.

Voyager said it has engaged Moelis & Company as a financial advisor, and that has been in discussions with advisors to Three Arrows regarding potential legal remedies.

As this was happening, Three Arrows Capital filed for Chapter 15 bankruptcy in the Southern District of New York late Friday after weeks of speculation that it was functionally insolvent

Bloomberg reported that Chapter 15 filings are generally tied to foreign proceedings.

A court in the British Virgin Islands had a week ago ordered Three Arrows’ local branch to enter into liquidation.

Three Arrows had borrowed large amounts of funds from several crypto lenders, including BlockFi, Celsius, Babel Finance and Voyager Digital, but was unable to pay.

On Thursday, the Monetary Authority of Singapore – the country’s key financial regulator – had accused Three Arrows of exceeding its asset threshold and providing false information.

Bitcoin fell over the weekend, trading at just over $US19,210 on Sunday, Sydney time.