NEW YORK (AFP) – Global stocks closed the week on a downcast note on Friday after poor United States (US) jobs data stoked recession fears while Japan’s Nikkei tumbled on a resurgent yen.
The US economy added 114,000 jobs last month, a drop from the prior month and fewer than expected, while the jobless rate rose to 4.3 per cent, the highest level since October 2021.
The report added to recession fears following lackluster manufacturing data on Thursday, pushing major US indices into the red for the entire day after a down session in Europe.
“Historically it’s very difficult to achieve a soft landing,” said Steve Sosnick of Interactive Brokers. “It’s easy for a soft landing to sneak up on you and become a hard landing. And that’s what the market is very much afraid of right now.”
The Dow Jones Industrial Average finished at 39,737.26, down 1.5 per cent for the day and 2.1 per cent for the week.
“And just like that, the market is worried about the US economy suffering a hard landing,” said Briefing.com analyst Patrick O’Hare.
“A sober market didn’t need any more cold water poured on it, but that is exactly what it got with the July employment report, which was filled with ample headline disappointment,” he said.
But Art Hogan of B Riley Wealth said the market is likely overreacting to a few weak data points, noting that most of the corporate earnings released in the last few weeks have been solid.
Earlier, European stock markets closed sharply in the red: Amsterdam retreated by more than three per cent, Frankfurt 2.3 per cent, Paris 1.6 per cent and London 1.3 per cent.
In Asia, where markets closed before the latest US jobs data, Tokyo led losses. The Nikkei 225 tanked 5.8 per cent – its biggest drop since the start of the coronavirus pandemic four years ago – owing to a stronger yen, which hits Japan’s key export sector.
Hong Kong and Sydney were off more than two percent, Seoul gave up more than three per cent and Taipei shed more than four per cent, with losses also in Shanghai, Mumbai and Singapore.
Wednesday’s decision by the Bank of Japan to hike interest rates for the second time in 17 years – and talk of another to come – strengthened the yen to its best level since March.
The dollar also weakened against the pound and the euro as traders bet the weaker US jobs data would translate into Federal Reserve (Fed) interest rate cuts. “The situation now shifts from ‘if’ the Fed will cut to ‘by how much’ will they cut,” said US investment analyst at trading platform eToro Bret Kenwell.
“The labour market is the lifeblood to the US economy and the Fed needs to ensure that they don’t risk weakening it too much solely in an effort to bring down inflation,” he said.
