Key events
It is what is known as a “risk-off” day on global stock markets: when traders sell riskier growth-focused shares and batten down the hatches for financial market squalls.
London’s FTSE 100 index is down 0.3% in the opening trades, but it is among the better performers in Europe.
Here are the opening snaps via Reuters:
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EUROPE’S STOXX 600 DOWN 0.9%
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FRANCE’S CAC 40 DOWN 0.6%; SPAIN’S IBEX DOWN 1%
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EURO STOXX INDEX DOWN 0.7%; EURO ZONE BLUE CHIPS DOWN 0.7%
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GERMANY’S DAX DOWN 1.1%
Global stock market rout as investors consider US recession chances
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
Stock indices around the world have slumped after weak manufacturing data and company earnings raised concerns that the US economy may be on its way to recession.
Japan’s Nikkei index fell 5.8% and the broader Japanese Topix fell 6.1%, Australia’s ASX fell 2.5%, and Hong Kong’s Hang Seng was down 2.2%. That Nikkei performance was the worst since March 2020 – the coronavirus pandemic slump.
The Nikkei 225 is getting absolutely hosed today -5%, the worst day since March 2020 and for you stats heads a 4.3 sigma move – Volumes are crazy too, 84% above the 30 day average for this time
Jump ship is the cry
— Chris Weston (@ChrisWeston_PS) August 2, 2024
It followed steep equity declines in the US yesterday, with the small-cap Russell 2000 index down 3%, and chip designer Nvidia’s slump from record heights continued.
Analysts led by Jim Reid at Deutsche Bank, highlighted weak earnings from Amazon, and said that investors appear to be betting that the Federal Reserve steps in to prop up economic growth. They wrote:
The past 24 hours have seen an increasingly precarious backdrop for risk markets, with a risk-off mood on the back of another batch of weak US data yesterday followed by mostly downbeat tech earnings overnight.
Futures are now pricing in over 175bps of Fed rate cuts over the next 12 months, which is the sort of pace that we’ve only seen in a recession in recent cycles.
Intel, the US chip manufacturer, was one of the biggest additions to the gloom – and adding to the recent sell-off among semiconductor businesses. It is a huge name, and has received vast subsidies to build new chip factories in America, but it is struggling.
Its shares are down 19% in pre-market trading after it reported unexpectedly weak earnings and a plan to cut 15% of its workforce – a number that translates to more than 17,500 jobs globally.
It is a similarly drab picture across the US manufacturing sector, according to the Institute for Supply Management’s closely followed purchasing managers’ index (PMI).
Kyle Rodda, senior financial market analyst at Capital.com, an online trading platform, said:
Stocks plunged following an ISM Manufacturing PMI survey which revealed a bigger-than-expected slowdown in factory activity in the States, raising the spectre of a steeper drop in economic growth. Historically, it’s when the ISM Manufacturing number falls below 43 that the US economy falls into recession; so, while the index is a long way from that threshold, the markets will be keeping a close eye on how it trends as the US economy moderates.
Investors today will be on tenterhooks for US jobs numbers. A weaker-than-expected non-farm payrolls number could really put the pressure on the Federal Reserve to accelerate its expected interest rate cuts.
The agenda
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1:30pm BST: US non-farm payrolls (July; prev.: 206,000 jobs; cons.:176,000)
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1:30pm BST: US unemployment (July; prev.: 4.1%; cons.:4.1%)
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1:30pm BST: US average earnings (July; prev.: 3.9% year-on-year; cons.:3.7%)
