INSIGHTMOTORSPORTCONTACT
In our Market Insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
US stocks decline sharply over new fears of slower growth
US stock markets plummeted on Monday, following declines in Europe and Asia, amid rising fears of an impending slowdown in the American economy.
The tech-heavy Nasdaq index opened 6.3% lower after a significant drop at the end of last week but managed to recover some of its losses throughout the day. Other major US indexes also opened sharply down, while European and Asian markets experienced steep declines, with Japan's Nikkei 225 falling by approximately 12.4%.
This downturn followed weak US jobs data released on Friday, which sparked concerns about the health of the world's largest economy. Additionally, the US Federal Reserve chose not to cut interest rates last week—a move that typically promotes economic growth—unlike other central banks such as the Bank of England.
There are also worries that shares in major technology companies, particularly those heavily invested in artificial intelligence (AI), have been overvalued and are now encountering difficulties. Last week, chipmaker Intel announced major layoffs and disappointing financial results, and there is speculation that its rival Nvidia, a manufacturer of AI chips, may delay its latest product launch.
By the close, the Dow Jones index, which includes America's 30 biggest listed companies, was down 2.6% after paring its losses. The Nasdaq was 3.4% lower, and the S&P 500 had fallen 3%.
Shares in leading tech companies suffered significant losses, with Nvidia down 6.3%, Amazon down 4.1%, and Apple falling 4.8%.
In Europe, the CAC-40 in Paris reduced earlier losses to end 1.4% lower, while Frankfurt's DAX and the UK's FTSE 100 each lost about 2%.
The market turmoil began on Friday after the release of weaker-than-expected US jobs data, fueling speculation of an economic slowdown.
In July, US employers added only 114,000 jobs, significantly fewer than expected, and the unemployment rate rose from 4.1% to 4.3%. These figures raised concerns that the long-running US jobs boom might be ending and led to speculation about the timing and magnitude of future interest rate cuts by the Federal Reserve.
Recent data showed that the US economy grew at an annual rate of 2.8% in the three months ending in June, a much stronger performance than most developed countries. However, the new wave of market declines in the US has sparked fears of a global spread.
As the Nikkei plunged in Japan, stock markets in Taiwan, South Korea, India, Australia, Hong Kong, and Shanghai all dropped by between 1.4% and 8% on Monday.
Global stock market stabilises after US Market trouble eases
Japanese shares rebounded on Tuesday after a significant plunge on Monday, which had sent shockwaves through global financial markets.
The Nikkei 225 stock index surged by 10.23%, or 3,217 points, marking its largest one-day gain in points and nearly reversing the previous day's record drop.
In Europe, the FTSE 100 and stock markets in Paris and Frankfurt stabilised. The sharp decline in Tokyo had followed the Bank of Japan's decision to raise interest rates for only the second time in 17 years, which caused the yen to soar against the dollar.
This appreciation made Japanese stocks and exports more expensive for foreign investors and buyers, contributing to the Nikkei's 12% drop at the beginning of the week, impacting global stock markets. Concurrently, concerns about a potential slowdown in the American economy also affected shares in the UK, Europe, and the US.
On Tuesday, the FTSE 100 opened higher with a modest gain of 0.33% before declining. Stock markets in France and Germany also saw slight gains in early trading before falling. In Asia, stock markets in South Korea and Taiwan rebounded, rising around 3.5% after record falls.
Attention now shifts to the US, where the technology-heavy Nasdaq index experienced a further drop of 3.4%, though this was less severe than recent declines.
On Monday, the S&P 500 fell by 3%, and the Dow Jones Industrial Average ended 2.6% lower. Investors have been unsettled by weak employment data in the US, which showed that companies created fewer jobs than expected in July while the unemployment rate increased.
This has fuelled speculation about the timing and extent of future interest rate cuts by the Federal Reserve. Last week, the Fed decided to hold interest rates steady while other central banks opted to cut them.
Several experts caution that it is premature to conclude that the world's largest economy is heading for a downturn. The anticipation of the Fed's next meeting is likely to keep stock markets volatile.
UK economic activity leads the way in Eurozone service sector observations
The two largest economies of the Eurozone, France and Germany, have struggled significantly over the past year compared to the UK.
New data indicates that the UK economy has been outperforming both France and Germany, as post-Brexit Britain experiences a surge in demand in the service sector.
Following the Labour Party's victory in the general election last month, British companies have reported a surge in new clients and contracts, marking the fastest pace recorded since May 2023.
The S&P Global UK purchasing manager's index (PMI) shows that Britain's new business index rose from 51.6 in June to 54.9 in July, with new clients from Europe, North America, and Asia.
The PMI also revealed that confidence in UK business reached a five-month high after the election of Sir Keir Starmer, which brought greater certainty over government policy. Meanwhile, France and Germany have seen a notable slowdown in their activities.
France's services index rose to 50.1, barely above the 50 no-change benchmark, while Germany's services index declined from 53.1 in June to 52.5 in July.
The disparity between Brexit Britain and the Eurozone's two biggest economies suggests that the UK might avoid the worst effects of a potential global economic slowdown.
On Monday, global stock markets tumbled amid fears of a US recession following the Federal Reserve's decision to delay cutting interest rates.
Confidence in French businesses has hit its lowest level this year, with companies noting that the impact of the Olympic Games would soon wane and foreign investors might shift their focus.
Germany has also experienced a significant drop in confidence, signalling a downturn for the Eurozone. Many economists across Europe now predict an increased risk of recession for Germany.
