Global Markets Plunge Amid Recession Fears and Interest Rate Concerns
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Global markets took a sharp turn downward on Friday, as concerns over the potential for a US recession and interest rate hikes by the Bank of Japan (BoJ) sent stocks plummeting. The Institute for Supply Management's (ISM) manufacturing Purchasing Managers' Index (PMI) fell to an 8-month low, while the number of first-time jobless claims in the US exceeded market expectations.
The US Federal Reserve (Fed) gave the green light to interest rate cuts starting in September, but the data released on Thursday caused recession concerns to influence asset prices. The probability of a 50 basis points rate cut at the September meeting instead of a total of 75 basis points until the end of the year is seen as 30%.
In the US, the Nasdaq index fell 2.3%, the S&P 500 dropped 1.37%, and the Dow Jones decreased by 1.21%. The dollar index stands between 104.0-104.5, while Brent crude oil prices have stood at $79.9 per barrel.
European stock markets followed a mixed trend, with the FTSE 100 index in the UK dropping 1.01%, France's CAC 40 index 2.14%, Germany's DAX 40 index decreasing 2.3%, and Italy's MIB 30 index 2.68% on Thursday.
Asian equity markets witnessed a deepening of selling pressure, with the decline in Japanese equity markets exceeding 5%. The Bank of Japan (BoJ) stated that the Bank might continue to raise interest rates as part of the fight against inflation, while rumors that the BoJ could increase interest rate steps to 25 basis points in the markets increased risk perception.
Technology companies seem to be leading the downward trend, with the dollar/yen parity continuing to remain at its lowest level in the last 5 months. The yen strengthened with the hawkishness of the BoJ and concern that increasing recession concern in the world could negatively affect the performance of exporting Japanese companies.
Near the close, Japan's Nikkei 225 index fell 5.1%, South Korea's Kospi index 3.9%, Hong Kong's Hang Seng composite index 2.3%, and China's Shanghai index 0.5%.
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