Stock markets across the globe have been unsettled this week, with significant movements in response to recent economic events.
On Tuesday, European markets, including London’s FTSE 100, Paris’s CAC 40, and Frankfurt’s DAX, initially opened higher but soon experienced declines. This follows a dramatic rebound in Japan, where the Nikkei 225 index surged by 10.23% or 3,217 points after a sharp drop at the start of the week.
The recent volatility in global markets was largely triggered by the Nikkei’s 12% slump earlier in the week, which contributed to a sell off in UK, European, and US stock markets. This downturn was driven by concerns over a potential slowdown in the US economy and a rare interest rate cut by the Bank of Japan, which heightened global anxiety.
In the US, stock markets have been grappling with disappointing employment figures for July, which revealed a rise in the jobless rate. The technology heavy Nasdaq index, in particular, has faced significant declines, though it managed to reduce losses slightly on Monday, ending 3.4% lower. The S&P 500 and the Dow Jones Industrial Average also fell by 3% and 2.6%, respectively.
Experts attribute these market fluctuations to fears of a US economic slowdown and concerns that shares in major technology companies, especially those investing heavily in artificial intelligence (AI) may be overvalued. The weak jobs data has led to speculation about potential interest rate cuts by the US Federal Reserve. Last week, the Fed chose to hold rates steady, unlike other central banks that opted for reductions.
Mohamed El-Erian, economist and president of Queens’ College, Cambridge, criticized the Federal Reserve’s decision to delay a rate cut, suggesting it could increase the risk of a recession. He warned that a downturn in the US economy would have significant global repercussions, as the US plays a crucial role in driving worldwide economic activity.
The uncertainty surrounding the Federal Reserve’s next move has contributed to ongoing market volatility. Stefan Angrick, senior economist at Moody’s Analytics, predicts that market swings are likely to continue until the Fed’s next meeting in September.
Overall, global markets remain jittery, with investors closely watching for further economic indicators and central bank decisions.
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