(DCWatchdog.com) – As markets in the United States get set to open, American investors are facing an alarming situation. European and Asian stocks have crashed to nearly six-month lows as fears of a U.S. economic slowdown trigger a global selloff.
By 8:27 a.m. GMT, the pan-European STOXX 600 index had dropped 2.2% to 487.15 points, its lowest since February 14.
While the Euro STOXX volatility index spiked 5.7 points to 30.26, its highest level since March 2023, concerns about a potential U.S. recession have driven investors away from risky assets as Japan’s Nikkei fell 13%.
Chris Beauchamp, chief market analyst at IG Group, said, “You don’t get the Nikkei falling by its largest amount in nearly 40 years without some kind of repercussions across European markets.”
Japanese stocks dropped, experiencing their biggest one-day drop since the 1987 Black Monday crash. This was fueled by last week’s global market downturn, economic worries, and fears that investments backed by a weak yen were unraveling.
Moreover, the Nikkei share average plunged 12.4% as Friday’s poor U.S. jobs data raised fears of a possible recession, while the yen surged to seven-month highs against the dollar.
Japan’s banking stocks led the collapse, pushing the Nikkei into bear market territory with a 27% drop from a July 11 peak of 42,426.77.
The Nikkei lost 4,451.28 points on Monday, its largest one-day point drop ever. This loss surpassed the 3,836.48-point loss on October 20, 1987, when the Black Monday crash hit Japanese markets.
In turn, most analysts said neither interest rate expectations nor economic data could explain the severity of the sell-off, although the rise in the yen, with its near-zero short-term yields and steady depreciation, had been a funding currency for billions of dollars in investments for years.
U.S. stock index futures tumbled Monday, with Nasdaq futures dropping just over 4% as fears of a U.S. recession rippled through global markets.
Apple Inc. dropped 7.3% after Berkshire Hathaway cut its stake in the iPhone maker by almost 50%, suggesting that the billionaire investor is growing wary about the broader U.S. economy or stock market valuations that have become too high.
Nvidia fell 6.8% after reports of a delay in the launch of its upcoming artificial intelligence chips due to design flaws.
Throughout the week, a series of Fed officials will speak on the economy and monetary policy, and any indications of interest rate cuts could calm investors’ nerves.
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