The FTSE 100 experienced its most significant decline by 2.5 percent in over a year, while Japan’s Nikkei 225 saw a record fall overnight as concerns of a US recession grew.
Money markets are predicting a 60 percent likelihood that the Federal Reserve will announce a 0.25 percentage point rate cut within a week, responding to the global loss in confidence.
Wall Street’s ‘fear index’ reached its highest level in four years following weaker-than-expected US jobs and manufacturing data. This has raised questions about whether the Fed has delayed too long in cutting interest rates, potentially risking damage to the world’s largest economy.
The turmoil spread to European markets, with the FTSE 100 dropping by 2.5 percent in early trading and Frankfurt’s DAX falling 3 percent.
Tokyo’s Nikkei 225 closed down 12.4 percent, losing 4,451.28 points. This surpassed the 3,836-point loss on Black Monday in October 1987 when markets plummeted by 14.9 percent.
In addition, stock markets in India, and also across Asia, saw a bloodbath on Monday morning trading hours, as fears of a potential recession in the US drove investors away from risk assets.
In India, the Bombay Stock Exchange (BSE) flagship index Sensex opened Monday’s session over 2,600 points lower, while Nifty, the National Stock Exchange (NSE) flagship index, slipped below 24,000.
The market witnessed mayhem in the morning trading hours, with wide-spread selling in heavyweights across sectors, traders said.
The market rout is estimated to have led to a whopping close to $16 billion plunge in the market capitalisation of all listed companies on BSE.
The fear gauge India VIX surged 59 percent, its biggest spike since 2015.
Meanwhile, Tokyo led a plunge across Asian stock markets on Monday, after weak US jobs data fanned fears of a recession in the world’s top economy and boosted bets on several Federal Reserve interest rate cuts, AFP reported.
The sell-off followed another hefty day of losses on Wall Street, where heavyweight tech firms including Amazon and Microsoft took the brunt owing to worries an AI-fuelled rally this year may have been overdone.
A much-anticipated report Friday showed the US economy added just 114,000 jobs last month, well down from June and far fewer than expected, while the jobless rate rose to the highest level since October 2021.
The news came a day after lacklustre factory data that stoked concerns that Fed officials may have held borrowing costs at more than two-decade highs too long.
That has led to speculation the economy could be in for a hard landing and tip into recession.
Markets are “still reeling from last Friday’s seismic shifts in the global financial landscape,” said Stephen Innes in his Dark Side Of The Boom newsletter.
The losses in New York were followed in Asia, with Tokyo’s Nikkei tanking more than 7 percent at one point.
Hong Kong and Shanghai markets also dropped, with traders brushing off a set of directives released by China aimed at boosting household consumption in the world’s number two economy.
There were also big losses in Sydney, Singapore, Manila, Jakarta and Wellington.
The US central bank had signalled after its latest meeting Wednesday that slowing inflation and a softening labour market meant it could cut next month, with traders predicting two or three 25-basis-point reductions before January.
Now there is speculation it will lower rates a full percentage point in that time.
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