European and UK Stock Markets Tumble as US Economic Fears Grow

European stock markets experienced a sharp decline on Monday, following significant falls in Asia, as fears mount about a potential slowdown in the US economy. The FTSE 100 index in London fell by 2.8%, while Paris’s CAC-40 dropped by 2.5%, and Frankfurt’s DAX slid by 3.2%.

Earlier in the day, Asian markets were hit hard, with Japan's Nikkei 225 plummeting 12.4%, marking the largest point drop in its history. The plunge was sparked by disappointing US jobs data released on Friday, which raised concerns about the world’s largest economy potentially slowing down.

The yen has strengthened against the US dollar following the Bank of Japan's interest rate hike last week, making Japanese stocks more expensive for foreign investors. This has contributed to declines in stock markets across Taiwan, South Korea, India, Australia, Hong Kong, and Shanghai.

In the US, weaker-than-expected economic data has intensified speculation about a slowdown. Despite the Federal Reserve holding off on cutting interest rates last week, the UK’s recent rate cut by the Bank of England—its first in over four years—has added to market jitters.

Technology stocks, particularly those in the artificial intelligence (AI) sector, have been struggling. Intel announced major layoffs and disappointing results last week, while Nvidia faces speculation about delaying its latest product launch. The US Nasdaq index, which surged to a record high last month, corrected sharply by around 10% last week. Additionally, Berkshire Hathaway disclosed it had sold about half its stake in Apple, another major technology player.

US stock indices also saw declines on Friday, with the Dow Jones Industrial Average dropping 1.5% and the S&P 500 falling 1.8%. The US jobs report revealed that only 114,000 jobs were added in July, significantly below expectations, and the unemployment rate increased to 4.3% from 4.1%. This has raised concerns that the US job market boom might be waning.

Tomochika Kitaoka, chief equity strategist at Nomura Securities, noted that worries about the US economic slowdown might be excessive. He mentioned that while the Japanese market reacted nervously to the rate hike, it is still unclear whether the weak US jobs figures are an anomaly or a sign of a broader trend.

In the Asia-Pacific region, stock markets fell between 1.4% and 8%, while cryptocurrencies also suffered, with Bitcoin dropping to around $50,000, its lowest level since February.

Simon French, chief economist at Panmure Liberum, and Shanti Kelemen, chief investment officer at M&G Wealth, both highlighted the uncertainty in the current economic climate, noting that it is too early to definitively determine the direction of the US economy.

As markets grapple with these developments, investors are left to navigate the complexities of a potentially slowing global economy.