Fears of a US recession shake stock markets

Paris. Stock markets around the world plunged on Monday as investors feared that a slowing US job market could lead to a recession.

“There is chaos in the financial markets,” said Stephen Innes, an analyst at SPI AM, with the “trigger” being the US jobs report released on Friday, which showed a bigger-than-expected slowdown, with the unemployment rate in July at 4.3%.

Wall Street’s three main stock indices were down at the opening: the Nasdaq lost 3.10% at 14:00 GMT, dragged down by the fall of the American technology giants, the S&P 500 lost 2.48% and the Dow Jones 2.11%.

In Europe, Paris lost 1.41%, London 2.25%, Frankfurt 1.89%, Amsterdam 2.63%, Madrid 2.5% and Milan 2.07%.

In Asia, the Nikkei on the Tokyo Stock Exchange closed down 12.4%, the worst drop in points in its history.

The Bank of Japan’s monetary tightening and the yen’s rise added to fears of a US recession and caused the Japanese index to fall. Taiwan and Seoul fell by more than 8%.

The U.S. jobs figures gave investors the impression that “the Federal Reserve may have delayed interest rate cuts for too long, risking triggering a recession,” said Mark Haefele, chief investment officer at UBS Global Wealth.

To combat inflation, the Fed raised rates to their highest level in 20 years, between 5.25 and 5.50%, to force the US economy to slow down.

Until now, analysts had seen the US economy remaining strong, growing slightly and inflation slowing, a “soft landing” after the post-Covid period.

But markets now believe the US central bank will have to cut rates more sharply than planned to avoid a recession.

Expectations of a Fed cut were reflected in short-term bond market rates: the two-year U.S. bond rate fell to 3.79% around 14:00 GMT and the 10-year rate stood at 3.72% compared with 3.79% at the close on Friday.

Oil was also hit by recession fears, with North Sea Brent crude falling 0.89% to $76.13 at 14:00 GMT.

Its US equivalent, West Texas Intermediate (WTI), fell 0.95% to $72.82 a barrel, shortly after falling to a six-month low.

The yen, meanwhile, rose sharply, taking advantage of its safe haven status amid fears of a US recession.

The Japanese currency appreciated by 2.74% against the dollar, to 142.62 yen per dollar, and by 2.10% against the euro, to 156.58 yen per euro.