Global market crash: From Asian markets to crypto prices, US recession fears jolt financial markets
Global stock markets plummeted on Monday due to growing fears of a U.S. recession and a significant sell-off in technology stocks. The S&P 500 and Nasdaq Composite saw their largest one-day declines since September 2022, falling 3% and 3.4% respectively. The Dow Jones dropped over 1,000 points, reflecting a shift in investor sentiment following disappointing U.S. employment data. Concerns that the Federal Reserve’s prolonged high interest rates might jeopardize economic stability have fueled these worries.
Japan’s main stock index suffered a historic 12.4% decline, the largest since Black Monday in 1987, due to a recent rise in the Yen affecting exporters. The global sell-off also affected bond markets, with two-year Treasury yields experiencing volatility. Market instability, if sustained, could lead to tighter lending conditions and reduced consumer confidence, increasing recession risks.
The Bank of Canada has already cut rates in response to economic slowdowns, in contrast to the Fed’s current stance. Last week’s U.S. jobs report, which showed fewer jobs created and rising unemployment, heightened recession fears. Investors now anticipate significant rate cuts by the Fed to stimulate the economy. The probability of a U.S. recession within the next 12 months has risen to 25%, according to Goldman Sachs.
Despite recent declines, U.S. stock indices remain up for the year. However, analysts warn that the market’s previous gains, driven by excitement around artificial intelligence and potential rate cuts, might have been overly optimistic. Key tech stocks like Nvidia, Alphabet, and Apple experienced substantial drops, with Apple’s decline possibly influenced by Warren Buffett’s Berkshire Hathaway reducing its stake.
Overall, Monday’s market turmoil, especially severe in Japan, highlights the delicate balance central banks face in managing interest rates and economic growth amidst global financial uncertainty.
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