Fears of US recession send stock markets tumbling

Stock markets around the world have dropped sharply on Monday amid fears the US economy may be heading for a recession.

The UK’s FTSE 100 was down more than 2% after the markets opened on Monday, while the FTSE 250 fell more than 3%.

Other exchanges in Europe, including in France, Portugal and Spain, fell by similar levels, while Germany’s Dax was down 1%.

It follows much steeper drops in Asia earlier today.

Japan’s Nikkei 225 share index was down more than 12% at the close on Monday – its biggest fall since “Black Monday” in October 1987. The country’s broader Topix index also fell by a similar level.

South Korea‘s Kospi dropped more than 9%, while Taiwan‘s Taiex index slipped 8.4%.

Markets in Singapore, Indonesia, Thailand and the Philippines also fell by around 2% and 3%.

The declines prompted the triggering of circuit breakers – in which the trading of stocks and derivatives is halted for 20 minutes – by some exchanges during the day.

It comes after US jobs market data on Friday came in much lower than expected for July, sending the country’s stock markets tumbling.

Some 114,000 jobs were created during the month – significantly lower than the 175,000 new roles forecast by Wall Street.

The figure was the weakest since December last year and the second weakest since the start of the COVID pandemic in the West in March 2020.

Robert Carnell, from financial services firm ING, said: “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.”

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It also comes after the US Federal Reserve decided on Wednesday not to cut interest rates from the 5.25% to 5.5% range which they have been held at since July last year. Markets expect the central bank to make a cut in September.

Economists at Goldman Sachs said they believed there was now a 25% chance of a recession in the US, up from their previous estimate of 15%.

Concerns globally have also been heightened by worries over the strength of China’s economy and several weak earnings reports from major technology firms last week, as investors grow jittery over potential returns from investment in AI.

Fears over a possible US recession – coupled with ongoing concerns over tensions in the Middle East – have also prompted falls in the price of oil.

A barrel of the benchmark Brent crude has slipped by more than 1.2% to just under $76 (£60) on Monday morning.

Share prices have also been falling in Japan since Wednesday when its central bank raised its benchmark interest rate to around 0.25% from a range of zero to about 0.1%.

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