Global markets faltered on Friday after higher-than-expected US unemployment figures raised fears of a recession, and several disappointments in the US tech sector sent the sector tumbling on the stock market.
“The markets are at a crossroads; they are hesitating between a soft or hard landing for the American economy,” after its period of overheating and high inflation post-COVID, observes Sacha Hédelin, portfolio manager at Amplegest.
These recession fears resurfaced on Thursday after the publication of a sharp deterioration in manufacturing activity in the United States, and were reinforced by the latest figures on the American jobs market on Friday.
The unemployment rate thus increased more than expected, to 4.3% in July, against 4.1%, and only 114,000 jobs were created, against 179,000 the previous month (a figure revised sharply downwards) and 185,000 expected.
Faced with these indicators, the markets are wondering “if we have gone too far in raising key rates” intended to slow the economy and reduce inflation, and “if something has broken down in American growth”, underlines Sacha Hédelin.
In response, investors are shunning stocks, whose prices depend on corporate profits and would therefore be less profitable in the event of an economic slowdown.
In Europe, the Paris Stock Exchange lost 1.61%, closing at its lowest level since November. Milan fell 2.55%, Frankfurt was down 2.33%, London 1.31%, Amsterdam 3.11% and Zurich 3.59%. The broader European Stoxx 600 index fell 2.73%.
Meanwhile, on Wall Street, the tech-heavy Nasdaq index was down 2.58% at around 16:10 GMT, dragged down by online retail giant Amazon and semiconductor maker Intel.
The broader S&P 500 index also lost 2.18% and the Dow Jones fell 2.02%.
Interest rates on the bond market also reacted and fell sharply: the rate for 10-year US bonds fell to 3.84%, its lowest level in over a year, compared to 3.98% the previous day.
Furthermore, for Sacha Hédelin, “investors are starting to count on slightly more marked reductions in Federal Reserve rates”, which caused the American two-year rate, the most sensitive to central bank policies, to fall: 3.94% around 4:10 p.m. GMT, compared to 4.15% on Thursday.
The scenario of a sharp economic slowdown also penalized the dollar and oil prices. The dollar dropped 1.05% against the euro, to 1.0906 dollars per euro, and lost 1.34% against the yen, to 147.36 yen per dollar.
The price of a barrel of North Sea Brent crude fell by 3.18% to $76.99. Its American equivalent, a barrel of West Texas Intermediate, fell by 3.59% to $73.57.
Earlier in Asia, the Tokyo Stock Exchange had already fallen sharply by 5.81% and that of Hong Kong had dropped by 2.08%.
Banks were among the sectors that suffered from the risk of recession on Friday. In New York, Citigroup lost 6.67%, Morgan Stanley 5.32%. In Paris, Crédit Agricole fell 5.62% and Société Générale 5.93%. Barclays dropped 6.19% in London, Deutsche Bank 5.86% in Frankfurt, and UBS 9.49% in Zurich.
“Tech”, the first losers
In the technology sector, Intel fell 26.18% after disappointing results and the announcement of the elimination of 15,000 jobs, or 15% of its workforce.
Amazon, one of the largest capitalizations on Wall Street, fell by 8.83%, suffering from worse-than-expected results.
Snap, the parent company of Snapchat, fell 24.86% after disappointing the market with its forecasts.
In semiconductors, Nvidia lost 1.16% and Micron 6.53%. In Amsterdam, ASML lost 11.18%, while Infineon lost 5.05% in Frankfurt and STMicroelectronics 5.63% in Paris.
“Technology sector stocks have done very, very well since the beginning of the year, so it’s not absurd to see profit-taking,” says Sacha Hédelin.