Surprisingly weak US employment data on Friday stoked fears of a looming recession, prompting investors to dump stocks and turn to safe-haven bonds. Treasury prices surged, sending yields to multi-month lows, while oil price benchmarks fell by more than $3 per barrel at their session lows. The US dollar index dropped over 1% to its weakest since March.
Europe’s STOXX 600 fell nearly 3% on Friday as global equity markets encountered turbulence following a US jobs report that exacerbated fears of an economic slowdown in the world’s largest economy, with financials and tech sectors being the hardest hit.
The pan-European STOXX 600 index dropped 2.7% to 497.85 points, reaching a three-month low. Most European sub-indexes traded lower, with the technology sector experiencing a significant 6.1% decline, its largest one-day drop since October 2020, mirroring a sell-off on Wall Street.
Global equity markets were rattled after data revealed that the US unemployment rate jumped to a nearly three-year high of 4.3% in July amid a significant slowdown in hiring.
Markets were already rattled by downbeat earnings updates from Amazon and Intel, as well as Thursday’s softer-than-expected US factory activity survey. The monthly US non-farm payrolls report showed job growth slumped to 114,000 new hires in July from 179,000 in June.
The data raised expectations of multiple rate cuts by the Federal Reserve this year, which had opted to keep rates unchanged earlier this week. “The jobs data are signaling substantial further progress that the Federal Reserve made a policy error by not reducing the fed funds rate this week,” said Jamie Cox, managing partner for Harris Financial Group in Richmond, Virginia.
