What’s rocking global financial markets?

A late summer storm has lashed global financial markets with equity indices in the US and Japan plunging on Friday 2 August through to Monday 6 August, reflecting investors’ nervousness on the back of weak US jobs data published on Friday.

London Business School’s Dr Linda Yueh spoke on BBC Radio 4's The World Tonight on 6 August 2024 to provide her views on the situation.

Dr Yueh said that there is a fear of a recession in the US, noting that while interest rates have been cut by the Bank of England, and by the European Central Bank, the Federal Reserve hasn't cut rates. This, said Dr Yueh, is compounding a fear that restrictive rates, high borrowing costs coupled with a weak labour market might fuel a recession in the world’s largest economy.

Additionally, tech stocks have been suffering during the recent earnings season. The tech stock powerhouse that has produced sizeable gains for Wall Street earlier in the year, has now failed to deliver for investors and there is a concern that too much money has been poured into companies like Nvidia.

Japan has also been at the centre of the late summer storm, with its Topix index falling more than 12 per cent in the biggest sell-off since the “Black Monday” crash of 1987.

Last Friday’s US jobs report, which showed a much sharper slowdown in hiring than Wall Street anticipated, added to continuing fears that the US is coming under growing strains from high borrowing costs.

Japanese stocks have now soared more than 10 per cent after experiencing their biggest fall in 37 years, setting markets tumbling in Europe and on Wall Street.