Fears of an impending U.S. recession sent the Dow Jones Industrial Index tumbling more than 1,000 points in early trading Monday and triggered a panic sell-off in financial markets around the world.
Wall Street went into meltdown with the S&P 500 down 4 percent and Nasdaq dropping 5.5 percent. The Dow Jones slipped 3 percent, or 1,197 points by 9.35 a.m. Eastern.
Earlier, the FTSE 100 index in London fell by 2.1 percent, and it was followed by the Nikkei 225 in Japan plunging by 12.4 percent, or 4,451 points, the biggest one-day points drop in history.
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In Paris, the CAC-40 fell by 2.2 percent and Frankfurt’s DAX was down by 2.4 percent.
Even gold, a safe harbor in difficult times, was down 2 percent.
The stock market crisis was fueled by predictions of a U.S. slowdown caused by weaker than expected news across the domstic economy.
Jobs data released on Friday was poor and the U.S. Federal Reserve decided against cutting interest rates unlike the Bank of England and other central banks.
There were also reports of concern that tech stock in the U.S. were overvalued and may be heading for a correction.
The cautious signs coming from the world’s biggest economy sent investors fleeing from risk.
And help doesn't appear to be on its way anytime soon. “The Fed could ride in on a white horse to save the day with a big rate cut, but the case for an inter-meeting cut seems flimsy,” Brian Jacobsen, chief economist at Annex Wealth Management, told the Los Angeles Times. “Those are usually reserved for emergencies, like COVID, and an unemployment rate of 4.3 percent doesn’t really seem like an emergency.”
Circuit breakers designed to stop panic trading were triggered a number of times in Japan and South Korea and froze the market for short periods.
The BBC quoted Tomochika Kitaoka, chief equity strategist at Nomura Securities, as saying there was “too much” concern about the U.S. economy.
Stephen Innes, managing partner of SPI Asset Management, told CNN: “The buzz is all about the contagion effect of this aggressive bear onslaught, underscored by fears of a hard landing in the U.S. and a severe meltdown in Tokyo’s markets, which now appear to be self-perpetuating.”
Reuters reported that JPMorgan analysts were bearish, saying there was a 50 percent probability of a recession.
“Signs of emerging weakness in the U.S. economy are evident, with negative indicators from hiring, retail sales, and PMI reports,” Bruno Schneller, managing partner at Erlen Capital Management, told the agency.
