UK, 5 August 2024 (TDI): that the US economy might move into a recession have caused stock markets all over the world to plummet drastically on Monday.
After Monday’s market opening, the FTSE 100 in the UK was down over 2%, while the FTSE 250Fears was down over 3%.
Germany’s Dax sank 1%, while other European exchanges, such as those in France, Portugal, and Spain, saw comparable declines.
Significantly greater declines were seen earlier in the day in Asia, and more declines are anticipated when US markets open later.
It was the largest decline since “Black Monday” in October 1987, with the Nikkei 225 share index in Japan closing down more than 12% on Monday. Similarly large declines were also seen in the nation’s overall Topix index.
The Taiex market in Taiwan fell 8.4%, and the Kospi index in South Korea fell more than 9%.
Also experiencing declines of between 2% and 3% were the markets in Singapore, Indonesia, Thailand, and the Philippines.
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Certain exchanges during the day stopped trading stocks and derivatives for 20 minutes due to circuit breakers that were triggered by the falls.
It follows the country’s financial markets plunging on Friday when the US jobs market statistics for July came in substantially lower than predicted.
Less than the 175,000 new positions that Wall Street had predicted, or about 114,000 jobs, were added in the month.
It was also the lowest since December of last year and the second lowest since March 2020, when the COVID-19 epidemic first broke out in the West.
Financial services expert Robert Carnell stated: “What we have here is a scenario where the market perceives the US macroeconomic data as a recession ticker.”
The timing of this decision coincides with the US Federal Reserve’s decision on Wednesday to maintain interest rates at the 5.25% to 5.5% level that they have maintained since July of last year. The central bank is expected by the markets to reduce in September.
A recession in the US was once thought to be 15% more likely, but Goldman Sachs economists now gave it a 25% probability.
Investor trepidation regarding possible returns from AI investments has been exacerbated globally by concerns over China’s economic health and a number of disappointing earnings reports from large technology companies last week.
Oil prices have declined as a result of continuing worries about Middle East tensions as well as fears of a potential US recession.
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On Monday morning, the price of a barrel of benchmark Brent crude fell by more than 1.2% to slightly under $76 (£60).
Japan’s stock market has experienced a decline after the country’s central bank increased the benchmark interest rate on Wednesday, moving it from zero to approximately 0.1%.
