Over the past century, September has historically been noted as the worst month for the stock market, a phenomenon known as the "September Effect," where it has consistently underperformed. Theories behind this pattern include traders returning from vacations and rebalancing their portfolios, increased bond offerings that divert funds from stocks, and mutual funds closing out losing positions for tax reasons. However, none of these theories fully explain the trend, and some factors, such as algorithmic trading and the ability to work remotely, have countered those reasons. Looking at current market conditions, however, it could be another rut for the market as Japan carry trade unwinds might continue and the shrinking manufacturing sector is lingering. Labour market data later in the week will determine if the fear grows or subsides.

EQUITY

September has historically been "a bad month" for the stock market, and it might just be the case this time around as Wall Street opened the week much lower, particularly AI-related stocks like Nvidia down almost 10%. Dow Jones had limited losses as experts suggest that the current situation may lead to a rotation away from technology stocks towards broader market leadership. Alarmingly, VIX as a measure for volatility has shot up to above 20 and is climbing.

GOLD

Yesterday's macro report release saw gold price drag lower before recovering in Asian session. Gold prices now remained steady above $2,490 per ounce. Investors are closely monitoring labour data that could influence the Fed's rate-cutting strategy at the next meeting and moving forward. Other metals like copper were down on Goldman Sachs estimates as weak demand and high inventories triggered by Chinese property developers' financial struggles may spread to other commodities.

OIL
Oil prices sank around 5% to their lowest levels since December as economic data from China and the U.S. has further fuelled bearish sentiment, with China’s manufacturing hitting a six-month low and U.S. manufacturing remained contracted. Analysts are monitoring delayed U.S. inventory data, but the overall outlook for oil remains bearish as market pressures continue.

CURRENCY

The dollar index stabilised above 101 after reaching a two-week high, supported by increased safe-haven demand due to weak manufacturing data reigniting recession fears. The safe-haven Japanese yen rallied while riskier currencies like the Australian dollar and sterling weakened as traders sought safety following a significant sell-off on Wall Street. Markets are now focused on labour market reports with a 57% chance of a 25 basis point rate cut and a 43% probability of a larger 50 bps.