Global markets have rebounded following sharp declines on Monday as concerns over a potential recession in the US shook investors. Both UK and US markets opened higher on Tuesday, but were unable to fully recover from the previous day’s losses.
The S&P 500, which had experienced a 3% drop on Monday, rose 1.11% on Tuesday. Similarly, the Dow Jones Industrial Average (DJIA) saw a 1% increase after a 2.6% decline the day before. The tech-heavy Nasdaq Composite also saw a 1% rise after hitting its lowest level since May.
Monday’s market sell-off was sparked by a number of factors, including the US jobs market report for July, which fell below expectations. The decision by the US Federal Reserve to not cut interest rates also contributed to the downturn.
The tech sector was hit particularly hard, with seven high-performing companies, including Apple, Google, and Amazon, reporting disappointing earnings. This led to concerns about the level of investment in AI and the perceived lack of return on these investments.
The global impact of these market fluctuations was evident as stock markets around the world felt the effects. In the UK, the FTSE 100 ended the day with a 0.23% increase after a 2% drop on Monday. The FTSE 250, which includes more UK-based companies, saw a 0.65% increase after a 2.83% decline the previous day. The pan-European Stoxx 600 also saw a 0.44% rise after a 0.72% drop on Monday.
The sell-off also spread beyond stock markets, with cryptocurrency Bitcoin experiencing a drop to levels not seen since February before recovering on Tuesday.
In Asia, Japan’s Nikkei 225 index saw a 10% jump after a near record 12.4% plunge on Monday. South Korea’s Kospi and Taiwan’s stock exchange also saw significant gains after experiencing large drops the day before.
As investors grapple with the potential for a recession in the US, economists at Goldman Sachs have raised their estimate of a recession from 15% to 25%. Meanwhile, analysts at JPMorgan have a more pessimistic outlook, putting the probability of a recession at 50%.
The Federal Reserve is now expected to make a 0.5 percentage point cut in interest rates in September in an effort to stimulate the economy. However, the impact of these market fluctuations will continue to be felt globally as companies and economies rely on the stability of the US market.
