Global Markets Plunge Amid Growing U.S. Recession Fears - Aug 2024

By Michael Davis - 05 Aug '24 15:58PM

August 5, 2024 - World stock markets fell today as fears that the US could enter a recession accelerated. The selloff hit markets across the globe today, with Asian markets particularly hard hit.

Key Market Movements

NIKKEI 225: Nikkei 225, the stock index for Japan, was the primary loser, falling 12.40% to close at 31,458.42 - the largest one-day percentage drop since October 19, 1987 - and down 25.50% from its 2024 peak.
Shanghai Composite: China's Shanghai Composite Index fell 1.54% to close at 2,860.70, for its biggest one-day decline since July 23, 2024. It's down 3.84% on the year.
Hang Seng: Hong Kong's Hang Seng Index dropped 1.46%, ending the trading session at 16,698.36. The last time the index posted such a big three-day plunge was on May 31, 2024. For the year to date, it is now down 2.05%.

US Market Reactions

The Dow Jones Industrial Average, the S&P 500, and Nasdaq all fell hard in the US. The Dow was down more than 900 points in midday as investor anxiety over economic data that suggests a recession might be on the horizon is causing them to flee from risk and head towards the safety of bond markets. Bond yields have fallen to lows for the year.

Analyst Insights

Analysts said that a combination of bad news last week from the US economy, along with lingering concerns about the health of the global economy, led to the stock market rout. The technology sector, where some of the world's largest companies and most valuable stocks trade, was hit especially hard. Apple, the world's largest company by market value, fell by nearly 5% on Thursday.

Broader Economic Implications

Rising price volatility in securities markets is now triggering concerns about the broad economic outlook. Sharp falls in stock prices and bond yields point to investors preparing for a prolonged period of economic stagnation. It would be a disconcerting situation if we have learned nothing from past financial crises in which a sudden market collapse signaled a deepening of a forthcoming economic downturn.

Federal Reserve's Role

It has also been noteworthy that the Federal Reserve, in keeping interest rates unchanged, is seen as adding to market fears. Some are wondering if the Fed might need to cut interest rates drastically to save the economy.

AI Investment Concerns

Soaring stock prices in the past two years have also been fueled by massive investments in AI-focused tech companies, which generate no profits at all, and AI is nowhere near where it needs to be to be deployed at scale, prompting fears that it never will be, precipitating a selloff in big tech stocks such as Nvidia, Microsoft, Amazon, and Alphabet.

An economic landscape as fragile as demonstrators poised to breach the doors of a bank can be shattered at any moment. On a day when the general mood of the US economy sours, with recession fears making an increasingly acute appearance, global stock exchanges around the world succumbed to the wave of trepidation that has begun to engulf the economy. Major indices lost tens of billions in their sharpest drops since March. In the coming days, investors and analysts will be watching any indicators they can unearth, paying close attention to any market signals, as they try to determine when and how hard the downturn will hit.

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