Stock markets in Europe, Asia and New York have been rattled by fears of a US economic slump, as technology shares were hit by underwhelming earnings.
Concerns that the US could be sliding towards recession spurred a global sell-off on Friday, as confidence was dampened by weakness in the US manufacturing sector and disappointing results from Intel.
Japanese equities suffered their worst day since the Covid-19 pandemic rocked markets in 2020; the Nikkei 225 share index tumbled by 5.8% to its lowest closing level since January. The broader Japanese Topix fell 6.1%, Australia’s ASX fell 2.5% and Hong Kong’s Hang Seng was down 2.1%.
Europe’s main stock indices all declined on Friday morning, with European technology stocks falling to their lowest level in more than six months.
The Dutch chipmaking equipment manufacturer ASML’s shares fell 6%, while the rival ASM International dropped 10%.
“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,” said Jim Reid, an analyst at Deutsche Bank.
In London, the FTSE 100 blue-chip share index lost 50 points, or 0.6%, to 8,233, in early trading.
Friday’s sell-off followed a rough day’s trading on Wall Street on Thursday, where the Dow Jones industrial average fell 1.2%, or almost 500 points. This was triggered by data showing US manufacturing activity dropped to an eight-month low in July amid a slump in new orders, and a jump in the number of Americans filing new applications for unemployment benefits to an 11-month high.
Investors fear that the US economy could be weaker than central bankers at the Federal Reserve realised. On Wednesday the Fed left US interest rates on hold but hinted that a rate cut was close.
Financial markets are now pricing in a 100% chance that the Fed will cut rates in September. A quarter-point cut is likely but market pricing suggests a near-30% chance of a larger rate cut of 0.5 percentage points.
New York traders were bracing for further losses on Friday, with the Dow down another 0.9% in the futures market and the tech-focused Nasdaq on course for a 2% drop.
Intel’s shares were down more than 21% in premarket trading, after it announced plans to cut more than 15,000 jobs globally as it tries to “resize and refocus” its business. Amazon shares were down 8.7% after it missed sales forecasts and disappointed analysts with its latest outlook.
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Shares in the chipmaker Nvidia fell 4% in premarket trading, after a report that the US Department of Justice had launched an investigation into complaints from competitors that it may have abused its market dominance in selling chips that power artificial intelligence.
Russ Mould, an investment director at AJ Bell, an investment platform, said rising economic pessimism meant August has got off to a bad start for global stock markets.
“An economy going through a bad patch is one catalyst for a central bank to cut rates and hopefully stimulate activity. This thought process is likely to be at the top of the agenda for the Fed this week after shocking US economic data that featured bigger than expected jobless claims and contraction in manufacturing. The narrative has changed from rate cuts equating to good news to rate cuts meaning measures to avoid recession,” Mould said.
While shares slid, gold hit a fresh record on Friday as investors flocked to safe-haven assets. Gold futures gained $25.70 (£20.17), or 1%, to $2,506.40 an ounce.