Shares in New York and London fell sharply on Monday amid a global stock market rout triggered by fears of a US recession. The FTSE 100 closed down 166.5 points at 8,008, its lowest since April, a drop of more than 2%. In New York, the tech-focused Nasdaq fell 6%, the S&P 500 dropped 4.2%, and the Dow Jones lost over 1,100 points, a 2.8% decline.
The sell-off was sparked by weak US jobs data released on Friday, which showed the economy added just 114,000 jobs in July, far fewer than expected, while the unemployment rate rose to its highest since October 2021. Weak factory data last week added to recession fears less than 100 days before the US presidential election.
Japan's Nikkei 225 suffered its biggest single-day fall since the 1987 Black Monday crash, dropping 12%. Other Asian markets also fell heavily, with South Korea's Kospi down 9% and indices in Australia, Hong Kong and China sliding. Germany's Dax lost 2%.
Jim Reid, global head of macro research at Deutsche Bank, described the moves as 'astonishing' and said 'markets are melting down in Asia'. However, he noted that the jobs data may have been affected by Hurricane Beryl and that August volatility could be exaggerated by investors on holiday. Austan Goolsbee, president of the Chicago Fed, said the US economy did not appear to be entering recession.
Investment bank Goldman Sachs raised its estimate of recession probability from 15% to 25%, but its economists led by Jan Hatzius said 'we continue to see recession risk as limited' due to a lack of big financial imbalances. The Vix 'fear gauge' soared to its highest since the pandemic.
Tech stocks were among the biggest losers, with Nvidia down 10% from its peak in June. Apple, Amazon and Meta shed over 4%. In Asia, TSMC and Samsung lost 10%. The yen rose 2.6% against the dollar as investors anticipated higher interest rates in Japan, while bitcoin slumped 16% as traders abandoned riskier assets.
