The lights of Frankfurt’s bank skyline shone in the final light.
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LONDON – European stocks extended losses on Friday amid a sluggish global economy, as weak U.S. economic data stoked fears of a recession.
regional Stoke 600 The index fell 2.3% at 1:37 pm London time before paring losses slightly to fall 1.99% at 2:09 pm London time. All major exchanges and nearly every industry posted losses. Technology stocks fell 4.61%, with U.S. giant Intel falling more than 21% in pre-market trading after reporting a sharp decline in profits.
Policymakers decided on Thursday to cut the Bank of England’s key interest rate to 5% from 5.25% after a narrow 5-4 vote. Markets are not yet fully convinced that the Bank of England will take this step.
Bank of England Governor Andrew Bailey told CNBC that the direction of interest rates is “pretty clear” but he would not comment on the extent or timing of further rate cuts and said he would keep a close eye on services sector inflation and wage data. Market pricing indicates that interest rates are expected to remain unchanged in September, followed by another rate cut in November.
U.S. stocks plunged on Thursday as worries about the state of the economy grew. Weekly jobless claims came in higher than expected, while manufacturing data slowed.
The latest non-farm payrolls report released by the Bureau of Labor Statistics on Friday showed that U.S. job growth also slowed more than expected in July. Stock index futures fell after the news as fears of a recession grew.
Asia-Pacific markets fell sharply on Friday, with Japan’s benchmark index falling as much as 5%.
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Cedric Chehab, BMI’s global head of country risk, told CNBC’s “Street Signs Asia” program that the U.S.-led sell-off started a week and a half ago but escalated in the middle of this week. This is due to factors such as a hawkish Bank of Japan disrupting the popular yen carry trade in the short term, weak U.S. data and earnings volatility.
“But one thing people don’t remember is that typically between July and October, there’s a seasonal uptick in stock market volatility, so this is not completely unexpected,” Chehab said.
He added: “Especially after such a big rally in U.S. equities and global equities, earnings are a little mixed and valuations are high, but monetary policy is actually still very tight.”
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