Commentary

US markets were highly volatile due to concerns over economic growth and technical factors. S&P 500 and Nasdaq Composite approached correction levels, with fluctuations in the VIX volatility index reflecting investor unease. Technical trading factors, such as partial unwinding of Japanese carry trade and short covering, influenced market movements. Despite concerns over weaker consumer activity, some positive data points emerged, including a fall in jobless claims and a rebound in service sector activity. Moreover, as the labor market showed resilience, the US recession seems less likely in the near term.

In fixed income markets, US treasury yields increased as concerns over labor market eased. The municipal bond market faced its strongest issuance week of the year, leading to challenges in attracting demand. The investment grade corporate bond market experienced volatility but saw healthier movement later in the week. Meanwhile, the high-yield bond market remained subdued due to overall market instability.