Financial crash RECAP: Experts weigh in on how to turn market crash into opportunity
Japan's Nikkei fell by nearly 13 percent on Monday intensifying fears of a global crisis after trillions of dollars were wiped off stock markets last week. Now the rout has hit US markets.
People with diversified portfolios have been urged not to panic amid fears of a financial crash.
Ed Monk, associate director at Fidelity International, told the Telegraph: "Sharp falls for markets are never easy to handle but making hasty decisions with your investment can often compound the problem. Short-term losses are part of investing and cannot be avoided completely – it’s how you handle them that counts."
While patience is key, investors shouldn't simply stay still, as an opportunity may lie in the sell-off period. If share or unit prices of existing investments have fallen while the investment thesis remains, investors should jump to the opportunity to buy more at discounted prices.
Investments should also be spread over time to "average out the price you pay", the Telegraph also wrote.
This comes after US jobs data sparked a global market sell-off at the end of last week after investors were spooked at the prospect of a potential American recession. The sell-off is believed to have wiped trillions of dollars off of global markets.
Analysts said that they feared the US Federal Reserve had made a mistake by not cutting interest rates last week, and might now be too late to hold off a recession.
THIS LIVE BLOG IS CLOSED. THANK YOU FOR FOLLOWING OUR COVERAGE.
KEY EVENTS
FTSE plunges - Dow and Nasdaq collapse - Nvidia, Apple, Tesla down
A global market route has hit the US as Dow and Nasdaq plummeted in early trading.
The S&P 500 was down 4.2 percent while while the Dow Jones Industrial Average dropped 2.7 percent. The Nasdaq Composite was down 6 percent.
The news came after Japan's stock market suffered its worst-ever loss on Monday following weak US jobs data from the end of last week. The FTSE 100 in London was down more than 3 percent, its sharpest fall since July last year. Bitcoin has also been affected failing below $50,000 (£39,000).
The benchmark Nikkei 225 in Japan finished more than 12 percent down suffering its worst day since 1987 and hitting a seven-month low.
Tech-heavy Nasdaq craters as investors shed shares
The Nasdaq Composite, a tech heavy index, has dropped almost 800 points to 16,028.34, as investors shed shares in the sector's giant firms.
The Nasdaq reached a third straight week of losses on Friday, bringing it down over 10 percent from a record set in July.
Down Jones Industrial Average sheds 1,100 points
A narrower benchmark, the Dow Jones Industrial Average, made an eye-catching fall of over 1,100 points to hit 38,525.24.
The Chicago Board Options Exchange Volatility Index is now at its highest level since the Covid-19 pandemic began in 2022.
It came after after a spike in the US unemployment rate sparked fears that America may be headed for recession.
S&P 500 tumbles as investors spooked
The S&P 500, the main shares benchmark on Wall Street, has dropped by around 200 points at 5,125.30.
It slid to to 3.1 percent in early trading, off the back of its worst week in more than three months.
Big Tech stocks also tumbled sharply as the market’s most popular trade for much of this year continued to unravel. Apple, Nvidia and a handful of other Big Tech stocks known as the “ Magnificent Seven ” had propelled the S&P 500 to dozens of all-time highs this year, in part on a frenzy around artificial-intelligence technology.
They were so strong that they overshadowed weakness for areas of the stock market weighed down by high interest rates.
But Big Tech’s momentum turned last month on worries investors had taken their prices too high and expectations for future growth are becoming too difficult to meet.
A set of underwhelming profit reports from Tesla and Alphabet added to the pessimism and accelerated the declines.
Nvidia, Apple and Tesla shares slump
Tech industry giants Apple, Nvidia and Tesla also saw shares sinking as fears of a looming US recession saw a stock market plunge on Monday.
Apple (AAPL) shares dropped over 9 percent in premarket trading. It came after Warren Buffet's Berkshire Hathaway revealed in a filing this weekend that it had shed alsmot half of its shares in the firm last quarter.
Shares in chipmaking leaders Nvidia dropped more than 12 percent premarket, and is on track to continue recent losses.
Meanwhile Elon Musks's Tesla (TSLA) shed about 9 percent before the market opened, after sliding on Thursday and Friday.
European stock fall sharply amid fears of US recession
European stocks saw a sharp fall as today's session began, amid globally volatility around the possibility of a US recession.
The regional Stoxx 600 index had drepped by 2.34 percent as of 8:52 am, London time.
All major regional stock markets and sectors saw trades in the red, CNBC reports.
Japanese government monitoring market moves with 'grave concern'
Japanese Finance Minister Shunichi Suzuki said on Monday the government is cooperating with the central bank and watching shifts in the markets closely.
'It's hard to say what is behind the decline in stocks,' Suzuki told reporters, adding that officials were watching moves in the stock market with "grave concern".
Bitcoin tumbles to 5-month low
Bitcoin has dropped 15 percent on Monday to $51,600, amid sharp share price falls across the financial sector.
The tumble sees bitcoin’s at lowest level since February.
Despite being hit in recent days, the cryptocurrency - which is the most popular in the world - remains up about 17 percent in 2024.
Rival cryptos saw sharp drops, with Ethereum down 22 percent and BNB plummeting 19%.
It comes after crypto rose precipitously this year after bouncing back from a major crash in 2022.
Carry trades a factor in plummeting share prices, analysts say
Another factor contributing to the falling share prices was carry trades, where investors borrow money from a country with low interest rates and a relatively weak currency, like Japan, and invest those funds in places that will yield a high return, analysts say.
Investors have been selling stocks to repay those loans as their costs have risen with a stronger yen and higher interest rates.
“The surge in financial market volatility was the result of a perfect storm of macro and market shocks at a time when risk assets were already overbought and overstretched,” BMI, a unit of Fitch Solutions, said in a report.
It said the Bank of Japan’s July 31 decision to raise its key interest rate “led to a sharp unwind of the yen carry trade, which added downside pressure on risk assets which were already selling off.”
The slump has also seen Toyota Motor Corp.'s shares drop 13.7 percent and Honda Motor Co. lost 17.8 percent.
Meanwhile, Computer chip maker Tokyo Electron dived 18.5 percent and Mitsubishi UFJ Financial Group plunged 17.8 percent.
Sell off comes after dismal US unemployment report
The sell-off in the US came after a dismal outlook in last week's unemployment report.
Just 114,000 jobs were added by employers last month, according to to the data from the Labor Department released Friday, some way south of the 185,000 Dow Jones estimate.
They're the weakest job numbers since December and the second worst since the pandemic began in March 2020.
The unemployment rate also increase slightly to 4.3 percent - the highest its been since 2021.
Robert Carnell, from financial services firm ING, said: "What we are looking at now is a situation where the market is viewing what's going on in the US macro economy as ticking the recession box.'
Stock market 'fear index' surges to highest level in four years
An index used in Wall Street to gauge stock market turbulence has soared to a four-year high amid fears a US recession could unleash a global economic downturn.
The Chicago Board Options Exchange Volatility Index - known informally as the "fear index" - is now at its highest level since the start of the Covid-19 pandemic.
It comes as European and Asian markets plummet, and Wall Street is expected to suffer similar losses.
The worst hit are likely to be Megacap tech stocks, with tech giant Nvidia down 8.2 percent ahead of the markets reopening this afternoon.
Meanwhile, Apple is down 7 percent, while Meta and Tesla were both down over 4 percent.
Recession may not be driving equity markets, economist says
Though a US recession narrative fits the bill, it's not clear that it's driving equity markets, global professional services network Forvis Mazars says.
George Lagarias, its chief economist told Express.co.uk: "If anything, experience suggests that bad macroeconomic data and consequently higher rate cut expectations are more often fuel for market rallies, not pullbacks.
The economics expert said the equity markets "have corrected initially on the same limited tech-focused basis they had rallied in the past few months and then more broadly, due to technical factors and during a period which traditionally features low trading activity, at least from humans".
"While they may well continue to correct in the next few days or weeks, we don’t see a fundamental case for a broader equity re-rating," he added.
"The selloff mainly focused on the Magnificent Seven, and especially Nvidia, Microsoft and Amazon. Nvidia in particular, has shed more than 20 percent of its market value since the 10th of July.
"Despite the drop, the stock is still double its value at 2023 year-end, and trading 40x its forward earnings. While US large caps are down 5 percent, ex-the Magnificent 7, they are only down 0.75 percent.
He noted that the FTSE 100 "hasn’t moved significantly".
"As of Monday 5 August, we are seeing evidence of spillover in the wider market (the Nikkei down 12.5 percent, US futures down 3 percent). However, this is precisely the point where we’d expect the Fed to affirm it’s ‘Put’, one way or another."
Fears that Fed kept main interest rate at two-year high for too long
The rout began just a couple days after U.S. stock indexes had jumped to their best day in months after Federal Reserve Chair Jerome Powell gave the clearest indication yet that inflation has slowed enough for cuts to rates to begin in September.
Now, worries are rising the Fed may have kept its main interest rate at a two-decade high for too long, raising risks of a recession in the world's largest economy.
A rate cut would make it easier for U.S. households and companies to borrow money and boost the economy, but it could take months to a year for the full effects to filter through.
“Specifically, the scenario of higher unemployment constraining spending and further restraining hiring and incomes and economic activity leading to a recession is the feared scenario here,” Tan Boon Heng of Mizuho Bank in Singapore said in a report.
Apple among world's biggest firms seeing plunging shares
Some of the world’s biggest companies are on track to see shares plummet when trading reopens in New York today.
In premarket trading, Tech giant Apple was down 6.6 percent with chipmaking titan Nvidia dropping 8.8 percent.
Hype around AI had seen a huge spike in Nividia's share price before a sharp sell off which started on Friday, The Telegraph reports.
The Nasdaq 100, which is heavy on tech firms, is on track to plummet 3.6 percent when trading resumes.
Meanwhile, the S&P 500 is down 3 percent in premarket trading, with the Dow Jones Industrial Average down 1.5pc percent.
FSTE 100 plunges with fears of global financial crash following Japan's Nikkei collapse
Economists fears a global financial crash could be looming after the FTSE 100 plunged in early trading after an expected global stock market rout started overnight.
Japan’s Nikkei 225 index suffered its worst day since 1987, while London’s blue-chip index was 2.4 percent down after the open on Monday falling 193 points to 7,982, in its sharpest fall since July last year.
It comes after US jobs data sparked a global stock market sell-off at the end of last week, after investors were spooked at the prospect of a potential American recession.
Analysts said on Friday that they feared the US Federal Reserve may have made a mistake by not cutting interest rates, and might now be too late to hold off a recession.
Donald Trump blames market tumble on 'inept US leadership'
Donald Trump laid into Biden administration, blaming the government and claiming his Democratic rival for the White House, Kamala Harris, "doesn't have a clue".
In an all caps blast on his Truth Social social account, the former President wrote: "STOCK MARKETS CRASHING. I TOLD YOU SO!!! KAMALA DOESN’T HAVE A CLUE.
"BIDEN IS SOUND ASLEEP. ALL CAUSED BY INEPT U.S. LEADERSHIP!"
Summer of volatility ahead, finance expert warns
Markets are likely to see a summer of volatility, a finance expert has warned, as economists watch for developments in the Middle East.
Chris Beauchamp, chief market analyst at online trading platform IG, said: “Markets are in absolute turmoil this morning thanks to the Nikkei 225’s biggest one-day drop since 1987, which has wiped out the index’s gains for the year.”
He said that the FTSE and European stocks were likely to suffer a bad day, while “it is on Wall Street where a fresh wave of selling is on the cards”.
“Investors continue to flee tech stocks, and the Nasdaq 100 is expected to open down 1000 points lower from Friday’s close, a loss of over 5%.”
“This is a perfect demonstration of what happens when everyone tries to sell at once.
"Such moves don’t stop in a single day and we likely have a summer of volatility ahead of us, particularly as we await developments in the Middle East.”
Markets plunge in other Asia-Pacific countries
The tumble was seen in other Asia-Pacific markets on Monday, with The Korea Exchange forced to use circuit breakers to briefly cease trading in the benchmark Kospi index after it dropped over 8 percent.
Taiwan’s Taiex saw its worst-ever day, ending 8.4 percent down.
Meanwhile, Hong Kong’s Hang Seng Index and China’s Shanghai Composite saw drops of 2.6 percent and 1.2 percent respectively, with Australia’s S&P/ASX 200 losing 3.6 percent, CNN reports.
