Global markets slump over recession fears
FTSE 100 sees worst drop since July; Nasdaq and Dow Jones plummet
Global stock markets experienced a significant decline amid concerns that the US economy might be heading towards a recession. The UK’s FTSE 100 dropped over 2% by Monday afternoon, marking its worst performance since July 2023. The FTSE 250 also fell by 2.83% by the end of the trading day.
Other European markets, including those in France, Germany, Portugal, and Spain, saw declines between 2% and 4% because of Global stock markets.
Trump reacts to global stock-market sell-off
Trump recently wrote on Truth Social: “STOCK MARKETS CRASHING. I TOLD YOU SO!!! KAMALA DOESN’T HAVE A CLUE. BIDEN IS SOUND ASLEEP. ALL CAUSED BY INEPT U.S. LEADERSHIP!”
But earlier this year, he said the market was doing well… pic.twitter.com/viB2Vwlbqc
— Richard Smith (@Richard_ezio) August 6, 2024
In the US, major stock indexes dropped sharply after opening at 2.30pm UK time. The Nasdaq Composite, which includes many tech companies, fell 2.78%, closing at its lowest since early May. The S&P 500, known for its stable and profitable companies, decreased by 2.34% and ended the day with a 3% decline, the worst since September 2022. The Dow Jones Industrial Average also dropped by 2.6%.
These declines followed record highs for the Nasdaq and Dow Jones set in July, and an S&P peak in February. The downturn was driven by significant sell-offs in seven major tech companies: Apple, Alphabet (Google’s parent company), Amazon, Meta, Microsoft, Nvidia, and Tesla.
The market sell-off extended to cryptocurrencies, with Bitcoin falling to $54,650, a level not seen since February.
There was a silver lining for motorists as oil prices fell, with Brent crude dropping to $76.62 per barrel, its lowest since January.
Asian markets faced even steeper declines earlier in the day. Japan’s Nikkei 225 fell over 12%, its biggest drop since October 1987. South Korea’s Kospi dropped more than 9%, and Taiwan’s Taiex slid 8.4%. Markets in Singapore, Indonesia, Thailand, and the Philippines also saw declines between 2% and 3%. Circuit breakers were triggered on some exchanges, halting trading for 20 minutes.
These drops followed disappointing US jobs market data released on Friday. Only 114,000 jobs were created in July, far below Wall Street’s forecast of 175,000. This was the weakest figure since December last year and the second weakest since the COVID pandemic began in March 2020.
Robert Carnell from ING noted that the market now views the US macro economy as entering a recession.
The US Federal Reserve announced on Wednesday that it would not lower interest rates from the 5.25% to 5.5% range, which has been maintained since July last year. Markets anticipate a rate cut in September.
Goldman Sachs increased the probability of a US recession to 25%, up from 15%. JPMorgan analysts were more pessimistic, estimating a 50% chance of recession. Concerns over China’s economic strength and weak earnings reports from major tech firms also contributed to global investor jitters.
In Japan, share prices have been falling since Wednesday, following the central bank’s decision to raise its benchmark interest rate to around 0.25% from a range of zero to 0.1%.
Danni Hewson from AJ Bell commented that the US jobs figures had a chilling effect on markets already concerned by mixed earnings updates and tech company spending on AI plans. She also noted that the London market saw a similar trend, with various sectors, including mining and oil, losing ground.
Ms Hewson mentioned that recent riots in the UK could affect consumer confidence and footfall, crucial for retailers and hospitality venues. The potential insurance claims from damage caused by the unrest could also impact the struggling UK economy because of global investor.
Derren Nathan from Hargreaves Lansdown stated that the FTSE 100 opened down due to concerns over the US economy. Exporters were hit hard as fears of a US recession grew following poor employment and manufacturing data.
The discussion about the Federal Reserve’s September rate decision has shifted to how much the cut will be, with a half-point cut now seen as more likely. Concerns over a possible US recession and Middle East tensions have also led to a drop in oil prices, with Brent crude slipping by more than 1.2% to just under $76 (£60) on Monday morning.
