Global stock markets dropped sharply on Monday following fears that the US economy might be heading towards a recession, triggered by a disappointing job creation report for July.
Sharp Declines in US Markets
US stock indexes experienced significant declines. The tech-heavy Nasdaq Composite fell 3.4% to its lowest level since May. The S&P 500, which tracks large companies, dropped by 3%, marking its worst day since September 2022. The Dow Jones Industrial Average also fell by 2.6%.
European and UK Markets Hit Hard
In the UK, the FTSE 100 declined more than 2%, its worst performance since July 2023. The FTSE 250 fell by 2.83%. Other European markets, including those in France, Germany, Portugal, and Spain, also saw decreases ranging from 2% to 4%.
Significant Losses in Asian Markets
Asian markets were similarly affected. Japan’s Nikkei 225 dropped over 12%, the biggest fall since October 1987. South Korea’s Kospi fell by more than 9%, and Taiwan’s Taiex dropped by 8.4%. These significant losses triggered circuit breakers, pausing trading for 20 minutes on some exchanges.
Reasons Behind the Market Decline
The primary cause of the market slump was the US job report for July, showing only 114,000 new jobs were created, much lower than the expected 175,000. This is the weakest job creation since December last year. Additionally, the US Federal Reserve’s decision to maintain current interest rates further intensified recession fears.
Economic Predictions
Economists at Goldman Sachs have increased their recession estimate for the US to 25%, while analysts at JPMorgan estimate a 50% chance of recession. Investors are also worried about weak earnings reports from major tech companies and concerns about China’s economic strength.
Oil Prices and Consumer Confidence
Brent crude oil prices fell to $76.62 per barrel, the lowest since January. In the UK, recent riots have further impacted consumer confidence and could affect foot traffic in retail and hospitality sectors.
Future Outlook
As markets deal with fears of a US recession and global economic uncertainties, investors will be watching upcoming economic data and central bank decisions closely.