Global Stock Markets Plunge Amidst US Economic Slowdown Concerns
Stock markets across Europe and Asia experienced significant declines on Monday, driven by worries that the US economy might be slowing down.
In London, the FTSE 100 index fell 2.3% at the opening, while the Euronext 100 dropped by 3.5%. This followed sharp declines in Asia, where Japan’s Nikkei 225 plummeted by a historic 12.4%, or 4,451 points.
The downturn is attributed to weak US job data released on Friday, which raised concerns about the health of the world’s largest economy. In addition, the yen has strengthened against the US dollar since the Bank of Japan’s interest rate hike last week, making Japanese stocks more expensive for foreign investors.
Stock markets across Taiwan, South Korea, India, Australia, Hong Kong, and Shanghai all saw significant losses. A series of disappointing US economic data has fueled speculation about a potential slowdown. The US Federal Reserve’s decision to keep interest rates steady, contrasted with other central banks like the Bank of England that have cut rates, has added to market unease. Major US companies, including Amazon and Intel, also reported weaker-than-expected financial results.
Official employment data showed that US employers added only 114,000 jobs in July, well below expectations, while the unemployment rate ticked up. Shanti Kelemen, Chief Investment Officer at M&G Wealth, commented on BBC’s Today programme, saying, « There are signs that the market might be slowing down, which contributed to the recent market turbulence. »
In Tokyo, Kei Okamura, a portfolio manager at Neuberger Berman, noted that the selloff was intensified by the yen’s sharp appreciation, which has made Japanese goods more expensive and less attractive to global buyers. The yen has gained over 10% against the US dollar in the past month.
The Bank of Japan’s recent interest rate hike to its highest level since 2008 has further affected investor sentiment, especially regarding Japanese exporters. The Japanese economy had already contracted earlier in the year due to weak household spending and a depreciated yen.
Elsewhere in the Asia-Pacific region, Taiwan’s main index and South Korea’s Kospi fell more than 8%, while India’s NSE Nifty 50 dropped 2.8%. Australia’s S&P/ASX 200 declined by about 3.6%, Hong Kong’s Hang Seng fell 2.5%, and Shanghai’s index was down 1.4%. Cryptocurrencies also took a hit, with Bitcoin falling to around $50,000, its lowest since February.
In the US, Friday’s stock market decline followed the disappointing job data and revisions of previous months’ figures. This data has raised fears that the long-standing job boom in the US may be coming to an end, stirring speculation about potential Federal Reserve rate cuts.
Despite recent data showing a 2.8% annual economic expansion in the US, market sentiment remains mixed. Kelemen noted, « The evidence can be interpreted in both positive and negative ways, and it doesn’t universally point to one direction yet. »
Market concerns are compounded by high borrowing costs and indications that the recent rally in stock prices, partly driven by optimism around artificial intelligence (AI), might be losing momentum. The Nasdaq’s recent decline, falling about 10% from its peak, is termed a « correction. » The Dow Jones Industrial Average also dropped 1.5% on Friday, while the S&P 500 ended 1.8% lower. Over the weekend, it was revealed that Warren Buffett’s firm, Berkshire Hathaway, had sold about half of its stake in Apple, adding to market jitters.
