Global Stock Markets Tumble Amid US Recession Fears and Tech Sector Decline

Fears for US economy drive tech-led global stock slump

MSCI's broad gauge of global stocks dropped 0.8%, Europe's Stoxx share index fell 1.8%. Futures trading implied Wall Street's S&P 500 would open 1.2% lower and contracts that track the tech-heavy Nasdaq 100 index lost 1.8%, setting the gauge up for a 10% fall from its record closing high. The VIX measure of U.S. stock market volatility, known as Wall Street's fear gauge, rose to its highest reading since April and U.S. Treasuries rallied as traders poured into the benchmark debt securities viewed as havens. The sell-down followed a softer than expected U.S. factory activity survey on Thursday and came ahead of Friday's monthly U.S. non-farm payrolls report, which economists forecast will show job growth dropped to 175,000 in July from 206,000 in June. The U.S. Federal Reserve has kept benchmark borrowing costs at a 23-year high of 5.25%-5.50% for a year and some analysts believe the world's most influential central bank may have kept monetary policy tight for too long, risking a recession. "The historical experience is that turnarounds in the labour market can occur quickly and brutally and that relatively moderate increases in unemployment have been enough to trigger recessions in the United States," SEB US economist Elisabet Kopelman said. Money markets on Friday priced a 31% chance of the Fed, which is widely expected to cut rates in September and November, implementing a jumbo 50 basis points cut next month to insure against a downturn. "That does feel like we have jumped the gun," Fidelity International fixed income manager Shamil Gohil said. He added, however, that "we will also be watching for a rise in the unemployment rate which will give us clues about a weaker labour market and as a potential recessionary signal." Shares in U.S. chipmaker Intel tumbled more than 20% lower in pre-market trading on Friday after the group suspended its dividend and revealed plans to cut 15% of its workforce. Artificial intelligence chipmaker Nvidia, one of the biggest contributors to the tech rally, dropped 3% pre-market. Nvidia, up more than 700% since January 2023, has left many asset managers with an outsized exposure to the fortunes of this single stock. Steven Bell, chief economist for EMEA at asset manager Columbia Threadneedle, said that while investors were trimming big tech positions to rebalance their portfolios the U.S. was not about to contract. "Personally, I'm not thinking I should run for the hills," he said. "This is a slowdown, not a recession. And the background of lower interest rates, lower inflation and real wages rising because inflation is falling faster than wage growth, all of that's quite positive." Haven buying went full throttle on Friday, however. The 10-year Treasury yield was 4 bps lower on the day 3.978% on Friday after dropping as much 14 bps overnight. Bond yields fall as prices of the securities rise. The two-year yield, which typically reflects near-term interest rate expectations, dropped to 4.1244%. The 10-year German bund yield, a benchmark for euro zone debt costs, fell 4 bps to 2.201%. In foreign exchange markets, sterling was on track for a 1% weekly drop against the dollar as traders speculated that the Bank of England would follow its first rate cut of this cycle on Thursday with another in November. Commodity markets broadly displayed global growth fears as gold added 0.7% to $2,464 an ounce and Brent crude oil, although slightly up on the day at $79.70 a barrel, headed for a fourth successive weekly loss. (Additional reporting by Rae Wee in Singapore. Editing by Christian Schmollinger, Andrew Heavens and Louise Heavens)

Fears for US economy drive tech-led global stock slump

Global stocks dropped sharply on Friday, with richly-valued tech groups taking much of the pain, as investor anxiety about a U.S. economic slowdown sent shockwaves through markets already rattled by downbeat earnings updates from Amazon and Intel. With thin summer trading likely exaggerating moves, a slump that began in Asia with a 5.8% drop for Japan's Nikkei share index, its biggest daily fall since the March 2020 COVID-19 crisis, rippled through Europe and was set to continue on Wall Street later in the day. MSCI's broad gauge of global stocks dropped 0.8%, Europe's Stoxx share index fell 1.8% and futures trading implied Wall Street's S&P 500 would open 1.4% lower . The VIX measure of U.S. stock market volatility, known as Wall Street's fear gauge, rose to its highest reading since April and U.S. Treasuries rallied as traders poured into the benchmark debt securities viewed as havens. The sell-down followed a softer than expected U.S. factory activity survey on Thursday and came ahead of Friday's monthly U.S. non-farm payrolls report, which economists forecast will show job growth dropped to 175,000 in July from 206,000 in June. The U.S. Federal Reserve has kept benchmark borrowing costs at a 23-year high of 5.25%-5.50% for a year and some analysts believe the world's most influential central bank may have kept monetary policy tight for too long, risking a recession. "The historical experience is that turnarounds in the labour market can occur quickly and brutally and that relatively moderate increases in unemployment have been enough to trigger recessions in the United States," SEB US economist Elisabet Kopelman said. Money markets on Friday priced a 31% chance of the Fed, which is widely expected to cut rates in September and November, implementing a jumbo 50 basis points cut next month to insure against a downturn. "That does feel like we have jumped the gun," Fidelity International fixed income manager Shamil Gohil said. He added, however, that "will also be watching for a rise in the unemployment rate which will give us clues about a weaker labour market and as a potential recessionary signal." Shares in U.S. chipmaker Intel tumbled more than 20% lower in pre-market trading on Friday after the group suspended its dividend and revealed plans to cut 15% of its workforce. Artificial intelligence chipmaker Nvidia, one of the biggest contributors to the tech rally, dropped 3% pre-market. European tech stocks swooned 4% lower. Nvidia, up more than 700% since January 2023, has left many asset managers with an outsized exposure to the fortunes of this single stock. Steven Bell, chief economist for EMEA at asset manager Columbia Threadneedle, said that while investors were trimming big tech positions to rebalance their portfolios the U.S. was not about to contract. "Personally, I'm not thinking I should run for the hills," he said. "This is a slowdown, not a recession. And the background of lower interest rates, lower inflation and real wages rising because inflation is falling faster than wage growth, all of that's quite positive." Haven buying went full throttle on Friday, however. The 10-year Treasury yield was 4 bps lower on the day 3.978% on Friday after dropping as much 14 bps overnight. Bond yields fall as prices of the securities rise. The two-year yield, which typically reflects near-term interest rate expectations, touched its lowest since May 2023 before bouncing slightly higher to 4.165%. The 10-year German bund yield, a benchmark for euro zone debt costs, fell 5 bps to 2.201%. In foreign exchange markets, the yen added 0.4% to 148.8 per dollar to extend a rapid bounce back for the weakened currency, given some relief this week by the Bank of Japan raising interest rates to levels unseen in 15 years. Sterling was on track for a 1% weekly drop against the dollar as traders speculated that the Bank of England would follow its first rate cut of this cycle on Thursday with another in November. Commodity markets broadly displayed global growth fears as gold added 0.7% to $2,464 an ounce and Brent crude oil , although slightly up on the day at $79.70 a barrel, headed for a fourth successive weekly loss. (Additional reporting by Rae Wee in Singapore. Editing by Sam Holmes, Christopher Cushing, Christian Schmollinger, Andrew Heavens and Louise Heavens)

Why fear is sweeping markets everywhere

How quickly the mood turns. Barely a fortnight ago stockmarkets were on a seemingly unstoppable bull run, after months of hitting new all-time highs. Now they are in free fall. America's Nasdaq 100 index, dominated by the tech giants that were at the heart of the boom, has fallen by more than 10% since a peak in mid-July. Japan's benchmark Topix index has clocked losses well into the double digits, dropping by 6% on August 2nd alone -- its worst day since 2016 and, following a 3% decline on August 1st, its worst two-day streak since 2011. Share prices elsewhere have not been bludgeoned quite so badly, but panic is sweeping through markets (see chart 1). Wall Street's "fear gauge", the VIX index, which measures expected volatility through the prices traders pay to protect themselves from it, has rocketed to its highest since America's regional-banking crisis last year (see chart 2). Look beneath the surface, at individual sectors and firms, and the mood is even wilder. The Philadelphia semiconductor index, which tracks companies in the chipmaking supply chain globally, has fallen by more than a fifth in a matter of weeks. Arm, one such firm, has lost 40% of its market value. The share price of Nvidia, the previous bull run's darling, has been flailing. In the three days from July 30th it dropped by 7%, soared by 13%, then dropped by 7% again. On August 2nd the value of Intel, another chipmaker, plunged by more than a quarter. And it is not just the semiconductor industry. The KBW index of American banking stocks has fallen by 8% in a matter of days. The prices of Japanese bank shares have plummeted, too. The things that are -- or, at least, were -- doing well are the boltholes investors dash to when terrified: gold, the Japanese yen and American Treasuries. Troublingly, though, even the gold price cratered on August 2nd, with a peak-to-trough drop of more than 2%. Gold is usually a hedge against exactly the sort of chaos in the air just now. That its price was driven down suggests investors may have been selling not because they wanted to, but because they had to raise cash quickly to meet margin calls elsewhere. If so, there is a risk that other fire sales and a self-reinforcing doom loop may follow. Three developments have combined to tip investors over the edge. The first is a dawning realisation that artificial intelligence (AI), and especially the chipmaking industry that powers it, has been imbued with unrealistically high hopes. The biggest swings in American share prices came during a ten-day period in which five tech giants -- Alphabet, Amazon, Apple, Meta and Microsoft -- released results that left their shareholders crestfallen. Even Alphabet and Microsoft, whose revenues beat analysts' expectations, saw their share prices fall the day after they reported. Those of Amazon, which undershot such expectations, were punished far more. The across-the-board battering suggests investors' former euphoria over all things AI is evaporating. That has an immediate knock-on effect for chipmakers which, if AI investment retrenches, may not be facing limitless demand for their products after all. In fact, recent weeks have given such firms far more to fear than a mere change in animal spirits. On July 17th Donald Trump sent semiconductor stocks into a tailspin by suggesting Taiwan should pay for its own defence against China. TSMC, which makes the vast majority of the world's most advanced chips, is based in Taiwan and so would be vulnerable to a Chinese invasion. The Biden administration is also planning new curbs on exports of chipmaking equipment to China. With the twin threats of faltering demand and worsening geopolitics, it is little wonder that chip stocks are plunging. As tech firms have stumbled, so has America's economy -- the second development to give investors an attack of the vapours. Until recently "bad news is good news" was the mantra of the market. Any hint of slowing growth or a weaker labour market was good for asset prices, since it meant inflation was likely to stay quiescent and allow the Federal Reserve to cut interest rates more swiftly. But by the time America's jobs report was released on August 2nd, the mood had shifted: bad news is now bad news. The report revealed that the unemployment rate rose to a three-year high of 4.3% in July, while the economy added just 114,000 jobs, against a consensus forecast beforehand of 175,000. In other words, the risk of a recession that many thought had been avoided has just risen. Accordingly, traders began placing bets that the Fed would cut rates by half a percentage point at the central bank's next meeting in September, to stave off such a slowdown. That is despite Jerome Powell, the Fed's chairman, having dismissed the suggestion that rate-setters were considering such a move at the last meeting only days ago. Treasury yields plummeted, with the two-year rate falling to 3.9%, more than a percentage point below its level at the end of April. Weeks ago such a reduction in borrowing costs might have boosted stocks. Now investors seem to fear the downside of slowing growth, and its implications for company earnings, more than they long for cheaper money. The third force roiling markets is the strength of the Japanese yen. In recent weeks it has strengthened against a trade-weighted basket of currencies at close to its fastest pace in two decades. In part, this is because of the Bank of Japan's surprise decision to raise interest rates by a tenth of a percentage point on July 31st. A rising yen automatically depresses Japanese share prices, as many of the country's largest globetrotting firms, such as Hitachi, Sony and Toyota, make their earnings overseas in foreign currencies. Some of the decline in Japanese stocks may be explained by this effect. Probably more important, though, is the unwinding of popular trades linked to a weak yen and ultra-doveish monetary policy. The combination of the two made it possible to borrow cheaply in yen, convert the proceeds to dollars and invest in Treasuries, yielding far more than it cost to service the debt -- a "carry trade". But with Japanese interest rates rising and American ones falling, the trade has fading attraction. Worse, the yen's rapid strengthening raises the dollar cost of paying back the debt, pushing the trade into the red. The violent moves of the past few weeks will have forced many investors to close their positions, and possibly also to fire-sell other assets, adding to instability in both domestic and global stocks. As ever at the end of a turbulent week, the first question now is whether -- somewhere amid the chaos -- an asset's price has swung sharply enough to imperil an outfit that is heavily exposed to it. On that front, the decline in the gold price, and those of bank stocks, is ominous. The other, linked question is whether next week will be better or worse. Assuming no big investor decides it is time for a sell-off that will be up to the collective mood. Going on recent form, it isn't good.

Fear of US recession rattles global markets as tech shares fall

Concerns over American economy spark sell-off, with Japanese equities suffering worst day since 2020 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 sparked 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 missing sales forecasts and disappointing analysts with its latest outlook. 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.

Why recession panic is gripping markets

But suddenly, all those beliefs are being challenged by a perfect storm of market fears. Scepticism about the AI boom has been building for weeks, and reached a crescendo following a set of June quarter profit results from big tech firms that can best be described as middling. While there was nothing really wrong with the earnings numbers, the size of the capital investment at companies like Microsoft and Amazon - running at $US140 billion ($215 billion) a year for just those two companies - has raised justified doubts about future returns on that spend. That tech sell off has been compounded by the long-expected decision by the Bank of Japan to finally raise interest rates, which has forced the Yen higher against the US dollar, and helped unwind one of the world's most popular carry trades - this is where investors borrow in a low-interest rate currency like the yen and invest the proceeds in higher yielding assets around the world. A BOJ hike was always going to create volatility, but it's arrived at precisely the wrong time - that is, just as a recession panic rocks Wall Street. The rally we saw on Wall Street on Wednesday night after Federal Reserve chairman Jerome Powell strongly hinted at a September rate cut now seems a distant memory after two days of selling that saw the S&P fall 1.4 per cent on Thursday night and a further 1.8 per cent on Friday night. The Nasdaq has now entered a correction, having fallen 10.1 per cent since its all-time high last month. The US 10-year bond yield fell to 3.8 per cent, below 4 per cent for the first time since last December. The VIX volatility index hit its highest point since March 2023, when the US banking crisis was in full swing. A series of ugly data points have inflamed investors' recession fears. On Thursday night, the market was spooked by weaker than expected data on job openings and a manufacturing activity gauge that showed US factories are going backwards. But on Friday night came the real scare, when non-farm payroll data showed the US economy added 114,000 jobs in July, compared to expectations for 170,000 jobs, while the unemployment rate rose from 4.1 per cent to 4.3 per cent. Notably, June's labour market data was also revised down; downward revisions have now occurred six out of the last seven months. The stunning change in sentiment was summed up perfectly by the bond market, which is now ascribing an 80 per cent chance that the Fed cuts rates by 0.5 per cent in September. A week ago it was just 12 per cent. Incredibly, there was even talk that the central bank might have to hold an emergency meeting and cut rates outside of its usual cycle. That's not going to happen. For starters, the data doesn't warrant it - the labour market might be softening, and fast, but for now we are mainly seeing a slowdown in hiring rather than a pick-up in firing. And secondly, an intra-meeting cut would be a signal that the Fed is panicking, which really wouldn't help anyone. Powell and his colleagues will want to see more data before they decide how hard they need to go. July's US retail sales numbers, and then the August jobs numbers, will now take on an out-sized importance. Further, the US economy is arguably doing exactly what the Fed has been trying to engineer for two years, and finally cooling, bringing down inflation in the process. So why the whiff of panic on Friday night? There are two reasons. First, investors are remembering that every hard landing starts out as a soft landing. The path towards bringing down inflation without hurting the jobs market was always very narrow, and the potential for the Fed (or the Reserve Bank, for that matter) to leave rates too high for too long was always there. Now, those fears are suddenly front of mind. Second, as Chanticleer has been banging on about for months now, investor positioning became too extreme. They were so convinced about the AI story, the soft landing and earnings growth that we ended up with a market where valuations got too expensive (particularly compared to the returns on offer from bonds) and volatility was too low. They'd forgotten that markets typically fall when rates go down; since the 1970s, the S&P 500 has typically fallen by 23 per cent on average in the first 200 days or so following the first rate cut. What we are seeing then isn't just fears about a recession - it's fears about recession, exacerbated by the fact that no one is remotely positioned for it. Or in other words, some investors are rushing from one side of the boat to the other. There is, of course, a chance that this is another market head-fake: over-stretched positions get sold off a bit, the AI hype cools for a while and then another data point - say, Nvidia's next earnings report, due at the end of August - gets the ball rolling again. That's exactly what happened earlier this year, and it could happen again. But the difference now is that the economic backdrop has changed. Nick Ferres, chief investment officer at macro hedge fund Vantage Point, says it appears corporate profit margins are coming under pressure, and companies are no longer hoarding workers, leading to those deteriorating labour market numbers. In addition, Yen's rise is creating problems in over-leveraged pockets of the market. "We hear that some participants are asking 'when do we buy this?'" he says. "In contrast we fear that we are not defensive enough." The ASX 200 fell 2.1 per cent on Friday, its worst day in more than a year, and futures point to a fall of 1.5 per cent on Monday. What's particularly tricky for local investors is that we are heading into August reporting season, when volatility is always more pronounced. Local investors are heading into a perfect storm - volatility from local earnings, a recession panic from the US, persistent and growing fears about China's economy, and the Yen carry trade unwinding.

Global stocks plunge, bond prices rally as US data spooks

Oil price benchmarks fell by more than $3 per barrel at their session lows. The U.S. dollar index dropped over 1% to its weakest since March. Richly valued technology firms bore much of the pain, and an index of European bank stocks headed for its largest weekly decline in 17 months on soft earnings. The VIX stock market volatility measure, dubbed Wall Street's fear gauge, surged over 40%. Friday's U.S. jobs report showed job growth slowed more than expected in July and unemployment increased to 4.3%, pointing to possible weakness in the labor market and greater vulnerability to recession. Markets were already rattled by downbeat earnings updates from Amazon and Intel and Thursday's softer-than-expected U.S. U.S. factory activity survey in addition to the monthly U.S. non-farm payrolls report, which showed job growth slumped to 114,000 new hires in July from 179,000 in June. The data raised expectations of multiple rate cuts by the Federal Reserve this year, which just this week opted to keep rates unchanged. "The jobs data are signaling substantial further progress that the Federal Reserve made a policy error by not reducing the fed funds rate this week," said Jamie Cox, managing partner for Harris Financial Group in Richmond, Virginia. "It's very possible the Fed alters its inter-meeting communications on the balance of risks to remove all doubt about a September rate cut. " With thin summer trading likely exaggerating moves, a slump that began in Asia with a 5.8% drop for Japan's Nikkei, its biggest daily fall since March 2020 during the COVID-19 crisis, rippled through Europe and headed for Wall Street. MSCI's gauge of stocks across the globe fell 16.09 points, or 2.00%, to 787.31. The Nasdaq Composite lost 417.98 points, or 2.43%, to 16,776.16. The index has fallen more than 10% from its July closing high, confirming it is in a correction after concerns grew about expensive valuations in a weakening economy. The Dow Jones Industrial Average fell 610.71 points, or 1.51%, to 39,737.26, the S&P 500 lost 100.12 points. Europe's STOXX 600 fell close to 3%, with financials and technology the worst hit. MSCI's broadest index of Asia-Pacific shares outside Japan closed 2.48% lower 2.48%, at 553.72, while Japan's Nikkei fell 2,216.63 points, or 5.81%, to 35,909.70. The Fed has kept benchmark borrowing costs at a 23-year high of 5.25%-5.50% for a year, and some analysts believe the world's most influential central bank may have kept monetary policy tight for too long, risking a recession. Money markets on Friday rushed to price a 70% chance of the Fed, which was already widely expected to cut rates from September, implementing a jumbo 50 basis points cut next month to insure against a downturn. The "employment report flashes a warning signal that this economy does have the ability to turn rather quickly," said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management in Minneapolis. "Ultimately, today's employment data should embolden the committee to cut policy by more than 25 basis points at the next meeting." Shares in U.S. chipmaker Intel tumbled to a more than 11-year low and finished down over 26%, after suspending its dividend and announcing hefty job cuts alongside underwhelming earnings forecasts. Artificial intelligence chipmaker Nvidia, one of the biggest contributors to the tech rally, dropped 1.8% Up more than 700% since January 2023, Nvidia has left many asset managers with an outsized exposure to the fortunes of this single stock. Safe-haven buying went full throttle, with government debt, gold and currencies traditionally all rallying. They are assets viewed as likely to hold value during market chaos. The yield on benchmark U.S. 10-year notes fell 18 basis points to 3.798%. The 2-year note yield, which typically moves in step with interest rate expectations, fell 28.5 basis points to 3.8798%. In foreign exchange markets, the yen added nearly 2%, extending a rapid bounceback after the Bank of Japan raised interest rates to levels unseen in 15 years. In commodities, spot gold lost 0.37% to $2,436.31 an ounce and U.S. gold futures settled 0.4% lower to $2,4769.8. Oil prices took a hit on the growth worries, with global benchmark Brent futures settled down $2.71, or 3.41%, to $76.81 a barrel. U.S. West Texas Intermediate crude futures finished down $2.79, or 3.66%, at $73.52. (Additional reporting by Rae Wee in Singapore; Editing by Alex Richardson, Marguerita Choy, Deepa Babington and Chizu Nomiyama)

US jobs data fuels stock selloff; investors turn to safe-haven bonds

Elsewhere in commodities, oil prices fell $2 a barrel. The dollar index hit its lowest since March. Richly-valued technology firms bore much of the pain, and an index of European bank stocks headed for its largest weekly decline in 17 months on soft earnings. The VIX stock market volatility measure, dubbed Wall Street's fear gauge, surged over 40%. Friday's U.S. jobs report showed job growth slowed more than expected in July and unemployment increased to 4.3%, pointing to possible weakness in the labor market and greater vulnerability to recession. Markets were already rattled by downbeat earnings updates from Amazon and Intel and Thursday's softer-than-expected U.S. U.S. factory activity survey and the monthly U.S. non-farm payrolls report, which showed job growth slumped to 114,000 new hires in July from 179,000 in June. The data raised expectations of multiple rate cuts by the Federal Reserve this year, which just this week opted to keep rates unchanged. "The jobs data are signaling substantial further progress that the Federal Reserve made a policy error by not reducing the Fed Funds rate this week," said Jamie Cox, managing partner for Harris Financial Group in Richmond, Virginia. "It's very possible the Fed alters its inter-meeting communications on the balance of risks to remove all doubt all a September rate cut. " With thin summer trading likely exaggerating moves, a slump that began in Asia with a 5.8% drop for Japan's Nikkei, its biggest daily fall since March 2020 during the COVID-19 crisis, rippled through Europe and headed for Wall Street. MSCI's gauge of stocks across the globe fell 19.50 points, or 2.43%, to 783.90. The Nasdaq Composite was on track to fall into a correction, down 560.79 points, or 3.26%, to 16,633.36. The Dow Jones Industrial Average fell 569.93 points, or 1.41%, to 39,778.04 and the S&P 500 lost 119.44 points, or 2.19%, to 5,327.24. Europe's STOXX 600 fell close to 3%, with financials and technology the worst hit. Emerging market stocks fell 2.27% to 1,063.14. MSCI's broadest index of Asia-Pacific shares outside Japan closed 2.33% lower at 554.61. The Fed has kept benchmark borrowing costs at a 23-year high of 5.25%-5.50% for a year, and some analysts believe the world's most influential central bank may have kept monetary policy tight for too long, risking a recession. Money markets on Friday rushed to price a 70% chance of the Fed, which was already widely expected to cut rates from September, implementing a jumbo 50 basis points cut next month to insure against a downturn. The "employment report flashes a warning signal that this economy does have the ability to turn rather quickly," said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management in Minneapolis. "Ultimately, today's employment data should embolden the committee to cut policy by more than 25 basis points at the next meeting." Shares in U.S. chipmaker Intel tumbled to a more than 11-year low after the group suspended its dividend and announced hefty job cuts alongside underwhelming earnings forecasts. Artificial intelligence chipmaker Nvidia, one of the biggest contributors to the tech rally, dropped 2.8% Nvidia, up more than 700% since January 2023, has left many asset managers with an outsized exposure to the fortunes of this single stock. Safe-haven buying went full throttle, with government debt, gold and currencies traditionally all rallying. They are assets viewed as likely to hold value during market chaos. The yield on benchmark U.S. 10-year notes fell 16.3 basis points to 3.815%. The 2-year note yield, which typically moves in step with interest rate expectations, fell 26.7 basis points to 3.8982%. In foreign exchange markets, the yen added over 1%, extending a rapid bounceback as the Bank of Japan raising interest rates to levels unseen in 15 years. In commodities, spot gold lost 0.55% to $2,431.96 an ounce and U.S. gold futures fell 0.28% to $2,428.10 on profit-taking. Bullion was still poised to end the week higher. Oil prices took a hit on the growth worries, with global benchmark Brent futures down 3.5% at $76.74 per barrel. U.S. crude lost 3.89% to $73.34 a barrel. Both benchmarks were set for a fourth straight weekly decline. (Additional reporting by Rae Wee in Singapore. Editing by Sam Holmes, Christopher Cushing, Christian Schmollinger, Andrew Heavens, Louise Heavens, Alex Richardson, Marguerita Choy and Deepa Babington)

Dow Drops 600 Amid Fears Fed Too Slow To Cut Rates

NEW YORK (AP) -- Stocks tumbled Friday on worries the U.S. economy could be cracking under the weight of high interest rates meant to whip inflation. The S&P 500 sank 1.8% for its first back-to-back losses of at least 1% since April. The Dow Jones Industrial Average dropped 610 points, or 1.5%, and the Nasdaq composite fell 2.4% as a sell-off for stocks whipped all the way around the world back to Wall Street. A report showing hiring by U.S. employers slowed last month by much more than economists expected sent fear through markets, with both stocks and bond yields dropping sharply. It followed a batch of weaker-than-expected reports on the economy from a day earlier, including a worsening for U.S. manufacturing activity, which has been one of the areas hurt most by high rates. It was just a couple days ago that U.S. stock indexes jumped to their best day in months after Federal Reserve Chair Jerome Powell gave the clearest indication yet that inflation has slowed enough for cuts to rates to begin in September. Now, worries are rising the Fed may have kept its main interest rate at a two-decade high for too long. A rate cut would make it easier for U.S. households and companies to borrow money and boost the economy, but it could take months to a year for the full effects to filter through. "The Fed is seizing defeat from the jaws of victory," said Brian Jacobsen, chief economist at Annex Wealth Management. "Economic momentum has slowed so much that a rate cut in September will be too little and too late. They'll have to do something bigger than" the traditional cut of a quarter of a percentage point "to avert a recession." Traders are now betting on a 70% probability that the Fed will cut its main interest rate by half a percentage point in September, according to data from CME Group. That's even though Powell said Wednesday that such a deep reduction is "not something we're thinking about right now." Of course, the U.S. economy is still growing, and a recession is far from a certainty. The Fed has been clear about the tightrope it's walking since it started hiking rates sharply in March 2022: Being too aggressive would choke the economy, but going too soft would give inflation more oxygen. While refusing to claim victory on either the jobs or the inflation fronts on Wednesday, before the discouraging economic reports hit, Powell said Fed officials "have a lot of room to respond if we were to see weakness" in the job market after hiking its main rate so high. "Certainly today's job data feeds the weakening economy narrative, but I believe the market is overreacting at this point and pricing too much in on rate cuts at this stage," said Nate Thooft, senior portfolio manager at Manulife Investment Management. "Yes, the economy is weakening, but I am not convinced there is enough evidence that the data so far is a death knell for the economy." U.S. stocks had already appeared to be headed for losses Friday before the disappointing jobs report thudded onto Wall Street. Several big technology companies turned in underwhelming profit reports, which continued a mostly dispiriting run that began last week with results from Tesla and Alphabet. Amazon fell 8.8% after reporting weaker revenue for the latest quarter than expected. The retail and tech giant also gave a forecast for operating profit for the summer that fell short of analysts' expectations. Intel dropped even more, 26.1%, for its worst day in 50 years, after the chip company's profit for the latest quarter fell well short of forecasts. It also suspended its dividend payment and forecast a loss for the third quarter, when analysts were expecting a profit. Apple held steadier, up 0.7%, after reporting better profit and revenue than expected. Apple and a handful of other Big Tech stocks known as the " Magnificent Seven " were the main reasons the S&P 500 set dozens of records this year, in part on a frenzy around artificial-intelligence technology. But their momentum turned last month on worries investors had taken their prices too high. Friday's losses for tech stocks dragged the Nasdaq composite 10% below its record set last month. That level of drop is what traders call a "correction." Helpfully for Wall Street, other areas of the stock market beaten down by high interest rates began rebounding sharply last month when tech stocks were regressing, particularly smaller companies. But they tumbled too Friday on worries that a fragile economy could undercut their profits. The Russell 2000 index of smaller stocks dropped 3.5%, more than the rest of the market. All told, the S&P 500 fell 100.12 points to 5,346.56. The Dow dropped 610.71 to 39.737.26, and the Nasdaq composite fell 417.98 to 16,776.16. In the bond market, Treasury yields fell sharply as traders forecasted deeper cuts to rates coming from the Federal Reserve. The yield on the 10-year Treasury fell to 3.79% from 3.98% late Thursday and from 4.70% in April. In stock markets abroad, Japan's Nikkei 225 dropped 5.8%. It's been struggling since the Bank of Japan raised its benchmark interest rate on Wednesday. The hike pushed up the value of the Japanese yen against the U.S. dollar, which could hurt profits for exporters and deflate a boom in tourism. Chinese stocks fell as investors registered disappointment with the government's latest efforts to spur growth through various piecemeal measures, instead of hoped-for infusions of broader stimulus, while stock indexes dropped by more than 1% across much of Europe. Commodity prices also had a rough ride this week. Oil prices leaped after the killings of leaders of Hamas and Hezbollah fueled fears that a widening conflict in the Middle East could disrupt the flow of crude. But prices fell back Thursday and Friday on worries that a weakening economy would burn less fuel. A barrel of benchmark U.S. crude dropped back below $74 Friday after coming into the week above $77. ___

Global stocks plunge, bond prices rally as US data spooks

Unexpectedly weak U.S. employment data for July triggered recession concerns, leading to a sell-off in stocks and a surge in safe-haven bonds. The unemployment rate rose to 4.3%, and job growth slowed significantly. Investors reacted to these signs of economic vulnerability amid disappointing earnings from major tech companies like Amazon and Intel.Surprisingly weak U.S. employment data on Friday stoked fears of a recession ahead, prompting investors to dump stocks and turn to safe-haven bonds. Treasury prices surged, sending yields to multi-month lows. Oil price benchmarks fell by more than $3 per barrel at their session lows. The U.S. dollar index dropped over 1% to its weakest since March. Richly valued technology firms bore much of the pain, and an index of European bank stocks headed for its largest weekly decline in 17 months on soft earnings. The VIX stock market volatility measure, dubbed Wall Street's fear gauge, surged over 40%. Friday's U.S. jobs report showed job growth slowed more than expected in July and unemployment increased to 4.3%, pointing to possible weakness in the labor market and greater vulnerability to recession. Markets were already rattled by downbeat earnings updates from Amazon and Intel and Thursday's softer-than-expected U.S. U.S. factory activity survey in addition to the monthly U.S. non-farm payrolls report, which showed job growth slumped to 114,000 new hires in July from 179,000 in June. The data raised expectations of multiple rate cuts by the Federal Reserve this year, which just this week opted to keep rates unchanged. "The jobs data are signaling substantial further progress that the Federal Reserve made a policy error by not reducing the fed funds rate this week," said Jamie Cox, managing partner for Harris Financial Group in Richmond, Virginia. "It's very possible the Fed alters its inter-meeting communications on the balance of risks to remove all doubt about a September rate cut. " With thin summer trading likely exaggerating moves, a slump that began in Asia with a 5.8% drop for Japan's Nikkei, its biggest daily fall since March 2020 during the COVID-19 crisis, rippled through Europe and headed for Wall Street. MSCI's gauge of stocks across the globe fell 16.09 points, or 2.00%, to 787.31. The Nasdaq Composite lost 417.98 points, or 2.43%, to 16,776.16. The index has fallen more than 10% from its July closing high, confirming it is in a correction after concerns grew about expensive valuations in a weakening economy. The Dow Jones Industrial Average fell 610.71 points, or 1.51%, to 39,737.26, the S&P 500 lost 100.12 points. Europe's STOXX 600 fell close to 3%, with financials and technology the worst hit. Emerging market stocks fell 24.30 points, or 2.23%, to 1,063.50. MSCI's broadest index of Asia-Pacific shares outside Japan closed 2.48% lower 2.48%, at 553.72, while Japan's Nikkei fell 2,216.63 points, or 5.81%, to 35,909.70. The Fed has kept benchmark borrowing costs at a 23-year high of 5.25%-5.50% for a year, and some analysts believe the world's most influential central bank may have kept monetary policy tight for too long, risking a recession. Money markets on Friday rushed to price a 70% chance of the Fed, which was already widely expected to cut rates from September, implementing a jumbo 50 basis points cut next month to insure against a downturn. The "employment report flashes a warning signal that this economy does have the ability to turn rather quickly," said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management in Minneapolis. "Ultimately, today's employment data should embolden the committee to cut policy by more than 25 basis points at the next meeting." Shares in U.S. chipmaker Intel tumbled to a more than 11-year low and finished down over 26%, after suspending its dividend and announcing hefty job cuts alongside underwhelming earnings forecasts. Artificial intelligence chipmaker Nvidia, one of the biggest contributors to the tech rally, dropped 1.8% Up more than 700% since January 2023, Nvidia has left many asset managers with an outsized exposure to the fortunes of this single stock. Safe-haven buying went full throttle, with government debt, gold and currencies traditionally all rallying. They are assets viewed as likely to hold value during market chaos. The yield on benchmark U.S. 10-year notes fell 18 basis points to 3.798%. The 2-year note yield, which typically moves in step with interest rate expectations, fell 28.5 basis points to 3.8798%. In foreign exchange markets, the yen added nearly 2%, extending a rapid bounceback after the Bank of Japan raised interest rates to levels unseen in 15 years. In commodities, spot gold lost 0.37% to $2,436.31 an ounce and U.S. gold futures settled 0.4% lower to $2,4769.8. Oil prices took a hit on the growth worries, with global benchmark Brent futures settled down $2.71, or 3.41%, to $76.81 a barrel. U.S. West Texas Intermediate crude futures finished down $2.79, or 3.66%, at $73.52.