Global stock markets slumped Friday as weak US jobs data failed to dispel concerns that imminent interest rate cuts will come too late to avoid a recession.
Since US Federal Reserve Chairman Jerome Powell stated last month that the time for interest rates to begin coming down and the pace would depend on economic data, investors have been keenly awaiting the latest jobs numbers.
Dismal July job figures caused markets to panic last month and analysts worried another big miss for August would have solidified perceptions that the US economy is slowing more sharply than initially thought and that the Fed had waited too long to begin cutting interest rates.
In the end government data showed Friday that the world’s biggest economy added 142,000 jobs last month, an increase from July’s figure which was revised notably lower to 89,000.
But it was below economists’ expectations of 165,000, according to a Briefing.com consensus forecast.
The unemployment rate, meanwhile, declined slightly from 4.3 percent to 4.2 percent.
“The key takeaway from the report is that it was not as good as hoped, but it also wasn’t as bad as feared,” said Briefing.com analyst Patrick O’Hare.
Investors initially took the report as a glass half full, with stocks pushing higher, but then sentiment turned and shares tumbled.
On Wall Street the Nasdaq was down more than two percent in morning trading, with tech stocks taking a big hit. Shares in chipmaker Nvidia fell 4.4 percent and Intel slumped 3.0 percent. Google parent Alphabet dropped 2.9 percent and Meta and Microsoft both shed 1.5 percent.
European stocks closed lower after having wobbled in afternoon trading.
Friday’s losses add to those earlier this week as investors worried about the prospects of a US recession and overvalued tech share valuations.
“It looks like recession fears are becoming more pronounced, with investors fearing that companies are facing reduced profits,” City Index and FOREX.com analyst Fawad Razaqzada told AFP.
Briefing.com’s O’Hare said the August jobs report “will keep the Fed on track for a rate cut” at its September 17-18 meeting, with the latest data raising expectations of a 50-basis-point reduction.
Traders have factored in 100 basis points, or one percentage point, worth of reductions before the end of 2024.
Two senior Federal Reserve officials said Friday that the time had come to begin lowering interest rates.
Fed governor Christopher Waller downplayed recession concerns.
He stressed that “while the labour market has clearly cooled, based on the evidence I see, I do not believe the economy is in a recession or necessarily headed for one soon.”
Tokyo’s stock market was weighed down Friday by a strong yen, which has picked up against the dollar on bets of a Fed rate-cut and growing expectations that the Bank of Japan would continue hiking its own borrowing costs.
Oil prices, which had been trading higher after eight OPEC+ nations announced Wednesday they will extend voluntary production cuts for two months, followed equities lower as confidence in the economic outlook wavered.
Weak demand as the US and Chinese economies struggle has caused crude prices to drop to their lowest levels of the year.
After European markets closed the main international contract, Brent crude, slumped to its lowest level in a year-and-a-half.
– Key figures around 1530 GMT –
New York – Dow: DOWN 0.8 percent at 40,432.04 points
New York – S&P 500: DOWN 1.4 percent at 5,426.45
New York – Nasdaq Composite: DOWN 2.2 percent at 16,755.78
London – FTSE 100: DOWN 0.7 percent at 8,181.47 (close)
Paris – CAC 40: DOWN 1.1 percent at 7,352.30 (close)
Frankfurt – DAX: DOWN 1.5 percent at 18,301.90 (close)
Tokyo – Nikkei 225: DOWN 0.7 percent at 36,391.47 (close)
Hong Kong – Hang Seng Index: (closed)
Shanghai – Composite: DOWN 0.8 percent at 2,765.81 (close)
Dollar/yen: DOWN at 142.29 yen from 143.42 yen on Thursday
Euro/dollar: DOWN at $1.1099 from $1.1110
Pound/dollar: DOWN at $1.3146 from $1.3180
Euro/pound: UP at 84.43 pence from 84.29 pence
Brent North Sea Crude: DOWN 1.5 percent at $71.61 per barrel
West Texas Intermediate: DOWN 1.5 percent at $68.15 per barrel
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