2024-08-03 04:00:00
World markets were in turmoil on Friday after higher-than-expected U.S. unemployment data sparked recession fears, while some disappointments in the U.S. “tech” sector sent stocks in the sector tumbling.
“Markets are at a crossroads; they are hesitating between a soft or hard landing for the U.S. economy after a period of overheating and high inflation following the COVID-19 pandemic,” said Sacha Hédelin, portfolio manager at Amplegest.
Those recession fears resurfaced on Thursday following news of a sharp deterioration in U.S. manufacturing activity and were reinforced by the latest data on the U.S. jobs market on Friday.
As a result, unemployment rose more than expected in July, from 4.1% to 4.3%, and only 114,000 jobs were created, compared to 179,000 the previous month (a significantly downward revision of the figure) and 185,000 planned.
Sasha Khedrin stressed that in the face of these indicators, the market is wondering “whether we have gone too far in raising key interest rates” to slow economic growth and reduce inflation, and whether “there is something wrong with U.S. economic growth.”
In response, investors are abandoning stocks because their prices depend on corporate profits, which would fall in a slowing economy.
In Europe, the Paris Stock Exchange fell 1.61% to close at its lowest level since November. Milan fell 2.55%, Frankfurt fell 2.33%, London fell 1.31%, Amsterdam fell 3.11%, and Zurich fell 3.59%. The European Stoxx 600 index fell 2.73%.
Meanwhile, on Wall Street, the tech-heavy Nasdaq plunged 2.58% at around 4:10 pm GMT, dragged down by online commerce giant Amazon and semiconductor maker Intel.
The S&P 500 also fell 2.18% and the Dow Jones fell 2.02%.
Bond market interest rates also responded, falling sharply: the 10-year U.S. Treasury bond rate fell to 3.84%, the lowest in more than a year, compared with 3.98% the day before.
In addition, Sacha Hédelin said that “investors began to expect more pronounced rate cuts from the Fed,” which led to a drop in the two-year U.S. rate, which is most sensitive to the central bank’s policy: 3.94% around 4:10 pm GMT, compared with 4.15% on Thursday.
The strong economic slowdown also had an adverse impact on the dollar and oil prices. The dollar fell 1.05% against the euro to $1.0906 per euro and 1.34% against the yen to 147.36 yen per dollar.
A barrel of North Sea Brent crude fell 3.18% to $76.99. Its U.S. equivalent, a barrel of West Texas Intermediate crude, fell 3.59% to $73.57.
In early Asian trading, the Tokyo Stock Exchange had fallen sharply by 5.81%, while the Hong Kong Stock Exchange fell by 2.08%.
Banks were among the sectors at risk of a recession on Friday. In New York, Citigroup fell 6.67% and Morgan Stanley slumped 5.32%. In Paris, Crédit Agricole fell 5.62% and Société Générale tumbled 5.93%. Barclays fell 6.19% in London, Deutsche Bank fell 5.86% in Frankfurt and UBS fell 9.49% in Zurich.
Technology, the first loser
In the technology sector, Intel shares fell 26.18% after disappointing earnings and the announcement of 15,000 layoffs, or 15% of its workforce.
Amazon, one of Wall Street’s largest companies by market value, fell 8.83% after its earnings came in worse than expected.
Snapchat parent company Snap’s forecast disappointed the market, and its stock price fell 24.86%.
In the semiconductor sector, Nvidia fell 1.16% and Micron fell 6.53%. In Amsterdam, ASML fell 11.18%, Infineon fell 5.05% in Frankfurt, and STMicroelectronics fell 5.63% in Paris.
Sacha Hédelin added: “Tech stocks have performed very, very well since the beginning of the year, so it’s not ridiculous to see some profit-taking.”
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