Global Stocks Drop as Japan's Nikkei Falls 13% and European Shares Hit Six-Month Lows

By Thea Felicity

Aug 05 2024, 10:51 AM EDT

Traders work on the floor of the New York Stock Exchange (NYSE) on August 1, 2024 in New York City. New economic data showed initial jobless claims rose the highest in a year and a manufacturing index that measures factory activity in the U.S. came in worse than expected, causing renewed worries of a recession and a broad sell off in stocks, including the Dow sinking 1.21%, the S&P 500 1.37% and the Nasdaq 2.3%. Jeenah Moon/Getty Images

Global stock markets experienced a sharp decline on August 5, Monday, with Japan's Nikkei index plummeting 13%-its largest one-day drop since the 1987 "Black Monday" crash. According to Reuters, the sell-off, fueled by growing concerns of a U.S. recession, extended to European markets, where major indices hit six-month lows.

The pan-European STOXX 600 index fell around 3%, while Germany's DAX, France's CAC 40, and the UK's FTSE all saw significant losses.

Global Stock Down; US Stock Futures Affected

However, the global stock decline wasn't confined to Asia and Europe; VCPost also shared that US stock futures took a hit. Nasdaq futures dropped 5%, and S&P 500 futures declined by 3%, setting the stage for a challenging day on Wall Street.

As a response, investors are increasingly wary of the economic outlook, with many expecting the Federal Reserve to hit back with interest rate cuts. A weak US jobs report by VCPost last Friday also added to the anxiety, leading to speculation that the Fed might slash rates by 50 basis points as soon as September.

To protect their money, investors turned to safer options, causing the Japanese yen and Swiss franc to rise in value and avoid riskier investments. Usually, the US dollar is a safe choice during uncertain times, but it weakened this time as more people preferred the yen and franc.

The prospect of interest rate cuts has also affected other markets, including commodities. Gold, typically a go-to asset during economic uncertainty, saw a drop of around 2.3%, while oil prices fell as concerns over global demand overshadowed supply issues.

Looking ahead, all eyes are on the Federal Reserve's upcoming decisions and their potential impact on the global economy.