This week in the US, the services sector’s numbers on Monday and the number of jobless claims on Thursday are two highly anticipated economic reports.
The powerhouse US economy could be drifting into recession which led to the stock market tumbling towards the end of the last week. The global investors are bracing themselves for a turmoil in the future.
The US data includes the job numbers which turned out to be worse than expected which frightened the investors in Europe, Asia and New York. The numbers indicate that the world’s largest economy is in its worst shape.
Towards the end of last week the given data along with the underwhelming results from tech firms like Amazon, Intel and Alphabet led to share sell-offs. This also made the shares in the Middle East drop on the 4th August amidst constant tension in the region.
The analysts worry that future indications of weakness in the larger economies may suggest increased volatility. The analysts were forced to warn of a recession in Germany after the slowdown of the economy in the previous month. Meanwhile, the Nikkei index’s stock price fell 2,216 points, or about 6%, on Friday due to an increase in interest rates by Japan‘s central bank.
The possibility of recession in some of the world’s largest economies have led to the prices of one barrel of Brent Crude drop to $79 from $88 in the previous month.
This week in the US, the services sector’s numbers on Monday and the number of jobless claims on Thursday are two highly anticipated economic reports. In other news, the UK will report data on the service sector on Monday along with several other major economies, such as China and Japan.
The online stock broker Pepperstone of the US, Chris Weston said that the global markets were a significant turning point. What matters today is whether money managers and traders believe sentiment has become unreasonably negative, or whether this deleveraging and risk aversion materialise in increased volatility and downturn, he added.
To come up with a solution, the market needs to see the data outcomes in order to have more confidence in pricing the risk of recession. This may feed into earnings expectations, consumer behaviours and business decisions, Chris said.
The market was shaken last week after the US jobs data had presented a worse-than-expected slowdown with 175,000 jobs that were expected but only 114,000 were created. This led to the employment rate to increase by 4.3% to a three-year high while US manufacturing activity also crashed. It fell down to an eight-month low in July as new orders moved away.
These figures have introduced fear that the largest economy of the world is vulnerable to an upcoming recession and a need to cut down rates has arised. This needs to take place faster than expected to spur demand over the old way of unwinding them in a more orderly fashion.
The investors have grown accustomed to the cooling of inflation so far this year. This also includes the gradual fall in employment which appeared to be setting the scene for the Fed to begin trimming interest rates gradually.
The optimism drove the stocks of S&P 500 up by 12% this year irrespective of the recent losses while on the other hand the tech focused Nasdaq also gained about 12%.
The main stock indices of Europe also dropped on Friday along with the European technology stocks dropping to their new low in over six months.
In the United States, Uber, Airbnb, Hilton International, and Coca-Cola are among the major corporations reporting financial results this week. This week will also see reports from European bellwether equities such as Generali, an Italian insurer, and Deutsche Telekom.
While stocks fell, gold reached a fresh high on Friday as investors raced to safe-haven assets. The US dollar fell, pushing the pound 0.5% to $1.28 and the euro 1.2% to $1.092.