Global financial markets are in turmoil as a wave of selling grips equities globally. Fears of a looming recession and uncertainty over central bank policy have sent investors scrambling for safety.
The US stock market for one, has been experiencing a decline as the global stock selloff deepens amid concerns that the Federal Reserve is moving too late to support a slowing economy, sending investors into the safety of bonds.
Today, Nasdaq 100, a US stock index futures, tumbled as much as 6.5 percent, coming close to triggering a circuit breaker, after the index entered a technical correction on Friday. S&P 500 contracts were down more than 2.5 percent.
U.S. non-farm payroll data, measuring manufacturing activity for July, dropped to the lowest level in eight months, sparking recession fear and spurring investors farther away from the stock market.
At the start of the year, there were projections of two to three rate cuts by the Fed but slower-than-expected economic data has deterred such hopes until the next meeting on September 18.
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However, traders are raising wagers on an inter-meeting Fed interest-rate cut. Inter-meeting rate cuts are sporadic and reserved for only severe risks where officials deem they cannot wait until their next scheduled decision. The last such emergency cut from the Fed was at the start of the coronavirus pandemic.
Similarly, Japan stocks have been on a bear run since Friday as a result of a plunge in some chip stocks.
The Nikkei, Japan’s benchmark index, fell by 12.4 percent. It was the worst day for the index since “Black Monday” of 1987. The loss of 4,451.28 points on the index was also the largest in terms of points in its entire history.
The Nikkei also erased all its gains so far this year, moving into a losing position year to date. That has caused Asia-Pacific markets to see a sell-off since last week, with the Nikkei 225 and Topix dropping over 12 percent.
This is after the Bank of Japan raised rates on Wednesday and left room open for more hikes because policymakers are confident in the country’s economy.
Also, European stocks fell sharply at the start of the Monday session, as global volatility continued amid concerns of a looming U.S. recession.
Tech stocks led its losses, shedding as much as 5 percent before paring losses slightly to trade down 4.7 percent, while banks were 3.7 percent lower.
