By D. Maan, Jadetimes News
Global Stock Markets Plummet Amid Economic Concerns
Global stock markets plunged drastically on Monday as part of a far flung trend of economic unease that started in Asia, spread to Europe, and finally hit the United States. The S&P 500 fell by 4.1% in the US, and the tech heavy Nasdaq dropped even further by 6.3%.
The FTSE 100 index fell 2.8% in London, but the declines were sharper in Asia. Japan's Nikkei 225 plunged 12.4 percent in its biggest ever point fall. The huge fall was caused by worries over how long the interest rate increase by the Bank of Japan could be sustained the first since the global financial crisis of 2008 given the current economic circumstances. The rise in the yen, which had been boosted by the interest rate increase, has made Japanese shares more expensive for foreign investors. This has exacerbated the sell off.
Global markets reflected this weakness elsewhere, with stock markets in Taiwan, South Korea, India, Australia, Hong Kong, and Shanghai also sharply lower. In Europe, the Paris CAC 40 shed 2.5% while Frankfurt's DAX lost 3.2%.
Especially hard hit by disappointing jobs data, released on Friday, was the US market, which showed a far smaller increase in employment than had been expected. US employers added only 114,000 jobs in July, well below forecasts, and the unemployment rate ticked up from 4.1% to 4.3%. That raised concerns the world's largest economy may be losing momentum.
Interest rate cuts were ruled out by the US Federal Reserve last week, unlike other central banks like the Bank of England, which cut rates for the first time in more than four years. Such a stance taken by the Fed increased concerns over the US outlook and shook global markets.
Tech stocks have been at the forefront of the selling. The Nasdaq, heavy with tech, lost 10% last week, considered a correction by some, following its record high last month. Intel announced company wide layoffs and poor financial results, shaking investor sentiment. Speculation is rife, too, that Nvidia the brand behind AI chips may delay its new product launch.
Warren Buffett's Berkshire Hathaway has sold about half of its stake in Apple, a move that sent the technology sector further into a tizzy. The Dow Jones Industrial Average slid 1.5% on Friday, while the S&P 500 closed 1.8% lower.
The yen strengthened following the rate hike by the Bank of Japan, which may turn out to be a good step in suppressing inflation. Still, it makes Japanese exports more expensive and less attractive to foreign buyers. This contributed to some of the nervousness in the regional market.
Cryptocurrencies were also thrown into the turmoil, with Bitcoin at around $50,000 its lowest since February.
Preliminary economic data indicates that the US economy grew at an annual rate of 2.8 percent, but Friday's jobs figures have put a question mark over its sustainability. As cited by Reuters, Simon French, chief economist at Panmure Liberum, said it was still too early to tell if the weak jobs number was an aberration, perhaps forced upon the labor market by the start of hurricane Beryl, or part of something more fundamental.
Shanti Kelemen, chief investment officer at M&G Wealth, said the position remained unclear. "You can find evidence to support either a positive or negative outlook," she said, highlighting how investors, like analysts, are currently confused about the direction of the economy.
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