Berliner Boersenzeitung - Stock markets plunge on US recession fears

Wall Street's tech-heavy Nasdaq Composite index tumbled 6.3 percent at the open, with the S&P 500 falling 4.2 percent and the Dow dropping 2.7 percent.

Major European indices were down around three percent in afternoon trading.

Tokyo's Nikkei tanked more than 12 percent in its worst day since the Fukushima crisis in 2011. It also suffered its biggest ever points loss, shedding 4,451.28.

The market meltdown was triggered by a weak US jobs report on Friday which showed the unemployment rate reached its highest since October 2021.

The report came two days after the US Federal Reserved decided, as expected, to keep interest rates at a 23-year high while signalling that it could cut them in September.

"Investors are gripped by fears that the Federal Reserve has waited too long to pivot on its policy, especially in light of Friday's disappointing US jobs data and a slew of other weak economic indicators pointing toward a looming recession," said market analyst Fawad Razaqzada at City Index and FOREX.com.

Friday's much-anticipated report showed the US economy added just 114,000 jobs last month, well down from June and far fewer than expected, and unemployment at 4.3 percent.

The news came a day after lacklustre factory data.

Investors fear the Fed's high rates, which aimed to slash inflation, could be plunging the economy towards a hard landing and recession instead of the soft landing sought by the central bank.

Expectations that the Fed could cut more aggressively than expected from September, or even be forced into an emergency reduction this month, sent the dollar sliding against the yen.

The Japanese currency was boosted also by a Bank of Japan interest-rate hike last week, analysts said.

The dollar went under 142 yen for the first time since January.

- Bitcoin, oil retreat -

Markets tumbled across the board Monday, with Brent North Sea crude reaching the lowest level in more than six months despite heightened Middle East tensions, while bitcoin slumped more than 10 percent to under $50,000.

"Aside from ongoing worries about a US recession, the continuation of the pressure on markets has been attributed to unwinding of the yen carry trade and geopolitical fears surrounding an expected Iranian military retaliation against Israel after Israel killed a high-ranking Iranian military official," said Briefing.com analyst Patrick O'Hare.

Many investors have borrowed at low interest rates in a weak yen to invest in higher yielding currencies, but the abrupt surge in the yen as well as interest rate moves is upending the trade.

Some analysts pointed to the "Sahm rule", which says an economy is in the early stages of recession if the three-month moving average of unemployment is 0.5 percentage points above its low over the previous 12 months. That was triggered by Friday's data.

O'Hare also noted big falls in tech and semiconductor shares.

That helped fuel sharp drops in Asia markets and US tech shares were also pulling down Wall Street indices.

Shares in AI chip manufacturer Nvidia plunged 14.6 percent at the start of trading on Monday.

Shares in Facebook and Instagram parent company Meta slumped 7.2 percent.

Microsoft and Google parent company Alphabet shares were down around five percent.

- Key figures around 1330 GMT -

New York - Dow: DOWN 2.7 percent at 38,658.34 points

New York - S&P 500: DOWN 4.2 percent at 5,124.26

New York - Nasdaq Composite: DOWN 6.3 percent at 15,714.23

London - FTSE 100: DOWN 2.8 percent at 7,947.17

Paris - CAC 40: DOWN 2.4 percent at 7,075.60

Frankfurt - DAX: DOWN 3.1 percent at 17,116.92

EURO STOXX 50: DOWN 2.9 percent at 4,504.58

Tokyo - Nikkei 225: DOWN 12.4 percent at 31,458.42 (close)

Hong Kong - Hang Seng Index: DOWN 1.5 percent at 16,698.36 (close)

Shanghai - Composite: DOWN 1.5 percent at 2,860.70 (close)

Dollar/yen: DOWN at 142.14 yen from 146.52 yen on Friday

Euro/dollar: UP at $1.0998 from $1.0912

Pound/dollar: DOWN at $1.2780 from $1.2802

Euro/pound: UP at 86.06 pence from 85.22 pence

Brent North Sea Crude: DOWN 1.2 percent at $75.93 per barrel

West Texas Intermediate: DOWN 1.2 percent at $72.66 per barrel

burs-rl/lth

(G.Gruner--BBZ)