European indices fell sharply due to worries about growth, tariffs, and inflation affecting global stocks. The German DAX dropped 2.66%, France’s CAC fell 2.91%, the UK’s FTSE 100 decreased by 0.70%, Spain’s Ibex declined 1.88%, and Italy’s FTSE MIB fell by 2.55%. Over the week, the German DAX lost 3.27%, France’s CAC lost 3.68%, the UK’s FTSE 100 fell by 0.57%, Spain’s Ibex decreased 0.78%, and Italy’s FTSE MIB dropped by 1.92%. Most European benchmark 10-year yields ended lower. Switzerland’s yield fell by 5.85%, the UK’s by 1.03%, Germany’s by 0.78%, Spain’s by 0.21%, and France’s by 0.15%. Italy’s yield increased by 0.25%. In the U.S., indices were also down, but not at their lowest. The Dow decreased by 0.97%, S&P dropped by 1.16%, NASDAQ fell by 1.63%, and Russell 2000 went down by 1.51%.

US Market and Commodities

U.S. yields dropped significantly as the market saw a nearly 90% chance of a rate cut in September. The 2-year yield fell by 22 basis points, 5-year by 16.3, 10-year by 12.2, and 30-year by 7.1. In commodities, crude oil fell to $67.43, gold rose by 1.6%, silver increased to $36.85, and copper gained 1.61%. Bitcoin decreased by $200, reaching $115,542. The steep drop in European stocks, particularly the German DAX and French CAC hitting their lowest points since March 2025, shows significant fear in the market. This is reflected in the CBOE Volatility Index (VIX), which has risen to over 28, indicating high market stress. This may prompt investors to buy put options on indices like the Euro Stoxx 50 and S&P 500 to bet on further declines. The sharp drop in U.S. bond yields is noteworthy, driven by a surprisingly weak July 2025 jobs report that fell short of expectations. With a 90% chance of a Federal Reserve rate cut in September, traders might consider going long on interest rate futures to capitalize on this trend. This situation parallels the central bank shifts seen in late 2018 and 2019, leading to a significant bond rally.

Commodities and Market Strategies

Crude oil dropping below its 200-day moving average of $67.98 is a major bearish sign for the global economy. This follows recent data showing China’s Caixin Manufacturing PMI for July 2025 fell to 48.5, indicating a contraction and raising concerns about demand. Selling crude futures or buying puts seems like a wise response to ongoing growth fears. In this risk-off climate, gold is proving to be a safe haven with a strong rally to $3,342. The decrease in real yields, as bond yields drop faster than inflation expectations, makes holding non-yielding gold more appealing for institutional investors. We recommend buying call options on gold or gold-backed ETFs to gain exposure to this safe haven. Expectations of a U.S. rate cut may weaken the dollar, creating opportunities in currency derivatives against the euro or yen. Meanwhile, Bitcoin’s decline suggests it is being seen as a high-risk asset rather than a digital haven during this downturn. Traders should approach crypto assets with caution until the market stabilizes. Create your live VT Markets account and start trading now.

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