Global Markets Hit Hard by Fears of a New US Recession
Stock markets worldwide experienced significant declines on Friday (8th August 2024), driven by escalating fears of a potential US recession and disappointing earnings from major technology companies. A weaker-than-expected US jobs report exacerbated the global sell-off, which revealed a cooling labour market and contributed to heightened economic anxiety.
US Jobs Report Fuels Recession Concerns
In the United States, the Bureau of Labor Statisticsreported that only 114,000 jobs were added in July, significantly below the anticipated 175,000. The unemployment rate rose to 4.3% from 4.1%, further stoking fears that the US economy might be heading towards a recession. “The sharp slowdown in payrolls in July and sharper rise in the unemployment rate makes a September interest rate cut inevitable,” said Stephen Brown, Deputy Chief North America Economist at Capital Economics.
This dismal data follows earlier weak reports on manufacturing and jobless claims, suggesting broader economic softening. The Dow Jones Industrial Average closed by 612 points, or 1.5%, while the S&P 500 and Nasdaq Composite fell by 1.8% and 2.4%, respectively. The Nasdaq has entered correction territory, marking a 10% drop from its recent peak.
Tech Sector Takes a Hit
The technology sector has been particularly hard hit, with major companies like Intel and Amazon experiencing sharp declines. Intel announced plans to cut over 15,000 jobs, which led to a 20% drop in its share price. The company cited falling sales and increased competition as key factors. “Our revenues have not grown as expected, and we’ve yet to fully benefit from powerful trends, like AI,” IntelCEOPat Gelsinger noted.
Intel tumbled by 20% in the pre-market session after decided to cut 15% of its huge workforce — about 15,000 jobs — as it tries to turn its business around to compete with more successful rivals like Nvidia and AMD. $NVDA drops 3.8% as US launches Nvidia antitrust probe after… pic.twitter.com/MQZJ2PtcbS
Similarly, Amazon’s shares fell over 10% after missing sales forecasts and issuing a cautious outlook. The broader tech market also suffered, with the Nasdaq index falling nearly 3% in early trading.
Asian and European Markets Reflect Global Sentiment
The downturn was not confined to the US. Asian markets, particularly Japan, saw significant declines. The Nikkei 225 fell by 5.8%, marking its worst day since the pandemic’s onset in March 2020. European indices also faced losses, with France’s CAC 40 and Germany’s DAX declining. European technology stocks hit their lowest levels in over six months.
They're selling Japan hard, so now is a good time to remember that the entire value of the Nikkei 225 is still a couple trillion dollars less than the combined value of Microsoft and Apple. pic.twitter.com/ANYLMnaE7e
As stock markets faltered, investors sought refuge in safer assets. Gold prices reached a new record high, driven by increased demand for safe-haven investments amid global economic uncertainty. Gold futures climbed to $2,506.40 per ounce, reflecting a 1% increase.
Conclusion
The global market turmoil underscores growing concerns about the strength of the US economy and its potential impact on the broader financial landscape. With signs of weakening economic indicators and a turbulent tech sector, investors are closely watching for further developments, including possible Federal Reserve actions to address economic instability.
