Recession fears as global stocks plummet

Stock markets around the world plummeted on Monday amid growing fears that the US is heading for a recession.

Stock markets around the world plummeted on Monday amid fears of a global recession.

In Japan, the share index was down more than 12%, the Nikkei 225 share index’s biggest fall since “Black Monday” in October 1987.

Australia’s S&P/ASX 200 index was down 3.7%, while Taiwan’s main share index and South Korea’s Kospi both fell more than 8%.

India’s main index, the NSE Nifty 50, was trading 2.8% lower while the Hang Seng in Hong Kong was down 2.5%,

The UK’s FTSE 100 was down more than 2% after the markets opened on Monday, with exchanges in Germany and France down 3% and 2.89% respectively.

Cryptocurrencies were also down. Bitcoin dropped to around $50,000, its lowest level since February.

People walk under a monitor displaying the benchmark Kospi index and the Korean Securities Dealers Automated Quotations (KOSDAQ) after the close of trading in Seoul on August 5, 2024. Seoul's stocks plunged more than eight per cent at closing, after weak US jobs data fanned fears of a recession in the world's top economy and boosted bets on several Federal Reserve interest rate cuts. (Photo by ANTHONY WALLACE / AFP)

The alarming downturn has been traced to the US where data on Friday showed fewer jobs had been created than expected, sparking fears of a recession.

This caused stocks in New York to fall dramatically with market watchers bracing for the economy to slow.

The data revealed non-farm payrolls increasing by 114,000 in July, short of the forecast 175,000, while the unemployment rate rose from 4.1% to 4.3 %.

Over the weekend Goldman Sachs’ recession probability indicator was nudged up from 15 per cent to 25 per cent.

Robert Carnell, from financial services firm ING, told Sky News: “What we are looking at now is a situation where the market is viewing what’s going on in the US macro economy as ticking the recession box.”

People walk past a monitor displaying the benchmark Kospi index after the close of trading in Seoul on August 5, 2024. Seoul's stocks plunged more than eight per cent at closing, after weak US jobs data fanned fears of a recession in the world's top economy and boosted bets on several Federal Reserve interest rate cuts. (Photo by ANTHONY WALLACE / AFP)

The US Federal Reserve decided on Wednesday not to cut interest rates from 5.25% to 5.5%, which it has held since last July.

Investors have also been spooked by disappointing earnings from Amazon, the world’s biggest retailer and Intel, the chip producer.

Shanti Kelemen, chief investment officer at M&G Wealth, told BBC: “[There are] just some signs that potentially the market is slowing down a bit.

“I think that also spooked some people on Friday and you’re also seeing the Japanese market was already closed when that happened so you’re seeing Japan react to those things that happen last week.”

Gold traded 0.74% higher on Monday and is up 7.7 per cent over the past three months.

The safe-haven Swiss franc and the yen have also risen.