Traders work on the floor of the New York Stock Exchange
Photo: AFP / Getty Images North America
US stock markets tumbled on Monday following falls in Europe and Asia as fears rose that the American economy is heading for a slowdown.
The S&P500 is steadily falling and before 7am NZT had dipped below the psychological 3 percent mark.
The technology-heavy Nasdaq index opened 6.3 percent lower, before recovering some ground and then continuing its losses.
Markets around the world have been facing furious selling and sharp falls on fears that the US economy is heading for a slowdown – and that many AI and tech stocks are overvalued.
The global sell-off began on Friday after reports showed a weakening economy, then swept around the world. Last evening Japan’s Nikkei 225 closed down 12.4 percent, a blow to the world’s fourth largest economy.
Weak jobs data in the US on Friday sparked concerns about the world’s largest economy.
At the same time, the US Federal Reserve held off cutting interest rates last week – something that typically boosts growth – in contrast to other central banks such as the Bank of England.
And there has been concern that shares in big technology companies, particularly those investing in artificial intelligence (AI), have been overvalued and are now facing a correction.
Chipmaker Intel announced major layoffs last week as well as disappointing financial results, and there is speculation that its rival Nvidia, which makes AI chips, will delay its latest product launch.
Doubts about US economy
The market rout began on Friday after weaker-than-expected jobs data from the US fuelled speculation that its economy is slowing.
The state of the US economy – and its stock markets – have a direct impact on New Zealanders due to the presence of US and global equities in Kiwisaver accounts. For several months accounts have steadily increased due to a buoyant Wall Street.
In July, US employers added 114,000 roles, far fewer than expected while the unemployment rate ticked up from 4.1 percent to 4.3 percent.
The figures raised concerns that a long-running jobs boom in the US might be coming to an end. It also stoked speculation about when – and by how much – the Federal Reserve will cut interest rates.
Simon French, chief economist and head of research at Panmure Liberum, said it was not yet clear if the jobs figures were an aberration because of Hurricane Beryl, a Category 5 storm that hit parts of the Gulf Coast of the United States in July, or because it was a first sign that companies were hiring fewer workers.
The most recent data showed that the US economy grew at an annual rate of 2.8 percent in the three months to the end of June, much stronger than most developed countries.
– BBC / RNZ