Global markets make up some losses after worldwide plunge

Global markets have rallied after worldwide plunges on Monday amid fears the US may be in recession.

Both UK and US markets opened higher than Monday evening and made up some, but not all of the gains lost.

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A partial recovery for US stock

After its worst day in nearly two years, the S&P 500 rose 1.11% following a 3% fall due to Monday’s global stock sell-off.

The index of 30 major companies listed on US stock exchanges, the Dow Jones Industrial Average (DJIA) was up more than 1% after a 2.6% tumble yesterday.

The tech company-heavy Nasdaq Composite rose nearly 1% after ending yesterday at its lowest level since early May, down 3.4%.

A dramatic Monday

The rally came after a dramatic day on Wall Street on Monday where the US index containing companies relied on to be stable and profitable, the S&P 500, had its worst day since September 2022.

All the major US stock market indexes fell at the opening bell and continued to drop up to the close.

The falls came from all-time highs, however. The Nasdaq and Dow Jones tumbles follow new records set in July. The S&P is coming off a February record.

Behind the drop were seven high-performing tech companies, the so-called magnificent seven: Apple, Google parent company Alphabet, Amazon, Meta, Microsoft, AI-microchip maker Nvidia and electric car producer Tesla.

Those tech companies reported results last week, which caused investors to fret about levels of investment in AI and a perceived lack of return.

Closer to home

It all impacted markets across the world as US-based companies are listed on worldwide stock markets and firms can rely on the US as the world’s largest economy.

In the UK the benchmark stock exchange index, the FTSE (Finacial Times Stock Exchange) 100, was up 0.23% as the trading day ended. It had closed down more than 2% on Monday, the worst day since July 2023.

The index comprising more UK-based companies, the FTSE 250, closed up 0.65%. It had fallen 2.83% by the end of the Monday trading day.

The pan-European Stoxx 600 was up 0.44% after falling 0.72% on Monday.

Sell-offs were not confined just to stock markets. Cryptocurrency Bitcoin had reached a level not seen since February, from which it recovered on Tuesday.

What happened in Asia?

Japan‘s benchmark Nikkei 225 share index soared 10% after it plunged a near record 12.4% yesterday – its biggest fall since “Black Monday” in October 1987, an unexpected and severe market crash.

South Korea‘s Kospi was up 5.6%, its best intraday gain since last November after dropping on Monday by the most since late 2008.

Taiwan‘s stock exchange jumped 4.6% following a record drop a day earlier.

Why did it happen?

It came after US jobs market data on Friday came in much lower than expected for July, sending the country’s stock markets tumbling.

The US Federal Reserve also decided last week not to cut interest rates from the 5.25% to 5.5% range which they have been held at since July last year. Markets now expect the central bank to make a 0.5 percentage point cut in September.

Economists at Goldman Sachs said it believed there was now a 25% chance of a recession in the US, up from their previous estimate of 15%.

Analysts at JPMorgan were more pessimistic, putting the probability of a recession at 50%.

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