Global stock
markets slump amid US growth fears – business live
Live
coverage of business economics and financial markets as weak manufacturing data
and weak earnings from Amazon and Intel spook economists
LIVE Updated
36m ago
38m ago
US Nasdaq
set to enter 'correction' territory, 10% down from peak
1h ago
Ryanair
cancelled 650 flights in July because of air traffic control
3h ago
Rolls-Royce
to give each worker £700 in shares, FT reports
4h ago
Global stock
market rout as investors consider US recession chances
Jasper Jolly
Fri 2 Aug
2024 11.23 BST
From 4h ago
08.03 BST
Global stock
market rout as investors consider US recession chances
Good
morning, and welcome to our live, rolling coverage of business, economics and
financial markets.
Stock
indices around the world have slumped after weak manufacturing data and company
earnings raised concerns that the US economy may be on its way to recession.
Japan’s
Nikkei index fell 5.8% and the broader Japanese Topix fell 6.1%, Australia’s
ASX fell 2.5%, and Hong Kong’s Hang Seng was down 2.2%. That Nikkei performance
was the worst since March 2020 – the coronavirus pandemic slump.
It followed
steep equity declines in the US yesterday, with the small-cap Russell 2000
index down 3%, and chip designer Nvidia’s slump from record heights continued.
Analysts led
by Jim Reid at Deutsche Bank, highlighted weak earnings from Amazon, and said
that investors appear to be betting that the Federal Reserve steps in to prop
up economic growth. They wrote:
The past 24
hours have seen an increasingly precarious backdrop for risk markets, with a
risk-off mood on the back of another batch of weak US data yesterday followed
by mostly downbeat tech earnings overnight.
Futures are
now pricing in over 175bps of Fed rate cuts over the next 12 months, which is
the sort of pace that we’ve only seen in a recession in recent cycles.
Intel, the
US chip manufacturer, was one of the biggest additions to the gloom – and
adding to the recent sell-off among semiconductor businesses. It is a huge
name, and has received vast subsidies to build new chip factories in America,
but it is struggling.
Its shares
are down 19% in pre-market trading after it reported unexpectedly weak earnings
and a plan to cut 15% of its workforce – a number that translates to more than
17,500 jobs globally.
It is a
similarly drab picture across the US manufacturing sector, according to the
Institute for Supply Management’s closely followed purchasing managers’ index
(PMI).
Kyle Rodda,
senior financial market analyst at Capital.com, an online trading platform,
said:
Stocks
plunged following an ISM Manufacturing PMI survey which revealed a
bigger-than-expected slowdown in factory activity in the States, raising the
spectre of a steeper drop in economic growth. Historically, it’s when the ISM
Manufacturing number falls below 43 that the US economy falls into recession;
so, while the index is a long way from that threshold, the markets will be
keeping a close eye on how it trends as the US economy moderates.
Investors
today will be on tenterhooks for US jobs numbers. A weaker-than-expected
non-farm payrolls number could really put the pressure on the Federal Reserve
to accelerate its expected interest rate cuts.
US Nasdaq
set to enter 'correction' territory, 10% down from peak
Wall
Street’s Nasdaq stock index, which traces many of the US’s tech giants, is set
to fall heavily when it opens at 14:30pm BST – and it could be enough to signal
a “correction”, when shares fall 10% from their peak.
Futures
trades indicate that the Nasdaq will fall by as much as 1.8% at the opening
bell.
Stock market
corrections often follow periods of exuberance, as economic cycles turn and
investors start to consider the potential for slowing output, and therefore
lower profits.
A bear
market is when shares fall by more than 20% – and that is often associated with
recession, such as when the coronavirus pandemic lockdowns stopped activity in
many sectors.
1h ago
11.05 BST
One of the
biggest fallers among Europe’s large-cap stocks today is computer chip
toolmaker ASM International.
ASM fell by
11% on Friday as it got caught up in the European tech stock sell-off.
The Dutch
company (whose initials originally stood for Advanced Semiconductor Materials)
makes equipment for depositing thin films of material on to silicon. That is a
key step in the manufacture of the millions of tiny transistors that make up a
computer chip.
ASM’s share
price had risen to a record of nearly €750 three weeks ago as the hype around
AI pushed up anything to do with computer chips. But since then its value has
slumped by a quarter, as investors have questioned whether the exuberance went
too far. It’s market value was €31bn (£26bn) before Friday’s slump.
However, ASM
investors won’t be feeling too put out: the company’s shares are still up 19%
this year, and have more than doubled since the start of 2023.
N.B., ASM
International is different to the much more valuable ASML, a fellow Dutch
listed company. ASML makes the lithography machines that use light to etch the
transistor patterns in semiconductors. ASML is down by 8% today.
The
similarity in the names comes from the fact that ASML was once a subsidiary of
ASM. ASML has become much more valuable since spinning off. It was worth €332bn
before today’s fall.
1h ago
10.47 BST
Ryanair
cancelled 650 flights in July because of air traffic control
Ryanair has
revealed it cancelled some 650 flights in July because of air traffic delays,
while rival Wizz Air said the global technology outage that hit Windows
computers directly disrupted about 1% of its flights, Press Association
reports.
The two
airlines reported the impact of disruption as they unveiled how many passengers
they flew last month.
Low-cost
airline Ryanair said it flew 20.2m passengers in July, an 8% jump on the 18.7m
people on its flights the same time last year.
Chief
executive Michael O’Leary recently said the group “suffered a serious
deterioration in European air traffic control capacity which caused multiple
flight delays”.
O’Leary
called for reform of air traffic control which he described as “hopelessly
inefficient”.
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1h ago
10.33 BST
Apple
managed to buck the trend of weak tech earnings last night. It is once more the
biggest listed company in the world by market value after the sell-off in
Nvidia in recent weeks.
Like Nvidia,
the iPhone maker is seen as a possible beneficiary from the artificial
intelligence hype cycle. The company hopes its introduction of AI features will
drive customers to buy its latest phones – after a period in which features
have stagnated somewhat.
The
Guardian’s tech reporter, Kari Paul, last night reported:
Apple
reported better-than-expected earnings in the third quarter of 2024, with buzz
about its new AI features offsetting a continuing decline in its key China
market.
Earnings
exceeded analyst predictions despite a year-over-year decline in iPhone sales,
with revenue rising 4.9% to $85.78bn in the three months ending 29 June,
beating the average analyst estimate of $84.53bn. The company maintained its
cash dividend at 25 cents for each share.
The strong
report represented a bright spot in the tech space after difficult earnings
reports from other tech giants like Amazon, Snap and Intel. The market saw a
sell-off on Thursday amid disappointing results, including from Intel – which
announced plans to cut more than 15,000 jobs as it tries to cut billions of
dollars in costs to turn its business around. Amazon’s stock also dropped more
than 4% on Thursday after the company reported lower-than-expected sales this
quarter and forward-looking statements indicating a continued slowdown in the
next.
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