Stock indices around the world have slumped after weak manufacturing data and company earnings raised concerns that the US economy may be on its way to recession.
Japan’s Nikkei index fell 5.8% and its Topix dropped by 6.1%, Australia’s ASX fell 2.5%, and Hong Kong’s Hang Seng was down 2.2%.
Analysts led by Jim Reid at Deutsche Bank, highlighted weak earnings from Amazon, and said that investors appear to be betting that the Federal Reserve steps in to prop up economic growth. They wrote: "The past 24 hours have seen an increasingly precarious backdrop for risk markets, with a risk-off mood on the back of another batch of weak US data yesterday followed by mostly downbeat tech earnings overnight.
"Futures are now pricing in over 175bps of Fed rate cuts over the next 12 months, which is the sort of pace that we’ve only seen in a recession in recent cycles."
Intel, the US chip manufacturer, was one of the biggest additions to the gloom – and adding to the recent sell-off among semiconductor businesses. It is a huge name, and has received vast subsidies to build new chip factories in the US, but it is struggling.
Its shares are down 19% in pre-market trading after it reported unexpectedly weak earnings and a plan to cut 15% of its workforce – a number that translates to more than 17,500 jobs globally.
It is a similarly drab picture across the US manufacturing sector, according to the Institute for Supply Management’s closely followed purchasing managers’ index.
It is what is known as a “risk-off” day on global stock markets: when traders sell riskier growth-focused shares and batten down the hatches for financial market squalls. London’s FTSE 100 index is down 0.3% in the opening trades but it is among the better performers in Europe.
Europe's Stoxx 600 is down 0.9%, France's Cac 40 is down 0.6%, Spain's Ibex is down 1% and Germany's Dax is down 1.1%.
The agenda • 1.30pm BST: US non-farm payrolls (July; previous 206,000 jobs; consensus 176,000) • 1.30pm BST: US unemployment (July; previous 4.1%; consensus 4.1%) • 1.30pm BST: US average earnings (July; previous 3.9% year on year; consensus 3.7%)
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