World markets see storm over US news: Reuters
Markets were gripped by fear, American and Japanese indices were under attack.
Unexpectedly weak U.S. employment data released on Aug. 2 fueled fears of an impending recession, sending investors off stocks and into bonds. This led to a sharp increase in the prices of treasury bonds and a decrease in their yield to multi-month lows, informs Reuters.
Oil prices fell by more than $3 a barrel, hitting session lows. The U.S. dollar index fell more than 1% to its lowest level since March.
Highly valued technology companies suffered the biggest losses, while an index of European bank shares posted its biggest weekly drop in 17 months on weak earnings. The stock market volatility index VIX, known as “Wall Street’s fear gauge,” rose more than 40%.
Friday’s U.S. jobs report showed job growth slowed more than expected in July and the unemployment rate rose to 4.3%. This indicates possible labor market weakness and greater vulnerability to recession. Markets have already been hit by disappointing earnings reports from companies such as Amazon and Intel. The data raised expectations for multiple rate cuts this year by the US Federal Reserve, which just this week decided to leave them unchanged.
“Jobs data suggests significant further progress that the Federal Reserve made a policy mistake by not cutting the federal funds rate this week. It is possible that the Fed will change its communication between meetings about the balance of risks to remove any doubt about a rate cut.” in September”, – said managing partner of Harris Financial Group, Jamie Cox.
As a result, fears of a recession gripped the markets, causing stocks to plummet and volatility to rise. Investors await further steps by the Federal Reserve to stabilize the economy and reduce risks.
