Global Market Plunge: Investors Panic Over U.S. Economic Slowdown

Global shares tumbled on Friday as investors reacted to signs of weakness in the U.S. economy. Japan's Nikkei 225 index fell 5.8%. The declines followed weak U.S. economic data, raising concerns that the Federal Reserve has missed its window to lower interest rates. Major tech stocks and other markets worldwide also experienced significant drops.

Global shares took a hit on Friday, with Japan's Nikkei 225 index plummeting 5.8% as investors fretted over signs of a weakening U.S. economy. The downturn came in the wake of disappointing U.S. economic data, causing fears that the Federal Reserve has delayed cutting interest rates in time to prevent stunted economic growth. Federal Reserve Chair Jerome Powell hinted that a rate cut might be possible in September after the central bank maintained rates at its recent meeting. “The brief comfort from Fed Chief Powell's indication of possible rate cuts has turned into panic among investors, who now think the central bank is not acting swiftly enough,” said José Torres, a senior economist at Interactive Brokers, in a report.

Anticipating a key employment report due on Friday, futures for the S&P 500 fell by 0.9%, while the Dow Jones Industrial Average futures lost 0.5%. A nearly 19% decline in Intel's shares in after-hours trading exacerbated the negative sentiment. The chip giant announced a 15% workforce reduction, around 15,000 jobs, aiming to compete better with rivals like Nvidia and AMD.

In early European trading, Germany's DAX dropped 1.4% to 17,834.67, and Paris's CAC 40 slipped 0.7% to 7,315.93. London's FTSE 100 was down 0.4% to 8,245.92. Japan's market retreated to levels last seen in January, erasing gains made in the previous month. The Nikkei 225 tumbled 2,216.63 points to 35,909.70, with heavy selling in bank, technology, and manufacturing shares. This marked a 6.2% loss over the past three months.

The dollar weakened to 148.99 yen early Friday from 149.37 yen on Thursday, while the euro edged up to USD 1.0803 from USD 1.0789. Elsewhere in Asia, Hong Kong's Hang Seng declined 2.1% to 16,950.46, and the Shanghai Composite index shed 0.9% to 2,905.34. South Korea's Kospi dropped 3.7% to 2,676.19, and Taiwan's Taiex fell 4.4%. Shares of major tech companies were particularly hard-hit: Samsung Electronics declined 4.2%, SK Hynix dropped 10.4%, and Taiwan Semiconductor Manufacturing Co., the world's leading chip producer, fell 5.9%.

On Thursday, U.S. stocks were also hammered, with the S&P 500 sinking 1.4% following a report from the Institute for Supply Management showing continued contraction in U.S. manufacturing. The Dow Jones fell 1.2%, and the Nasdaq composite dropped 2.3%. Meanwhile, smaller company stocks in the Russell 2000 index plummeted 3%. The job market showed signs of cooling, with the number of people applying for jobless benefits hitting a year-high, although overall worker productivity improved. This data may give the Federal Reserve more leeway to cut rates, potentially alleviating inflation.

Commodity prices were volatile, with benchmark U.S. crude oil gaining 79 cents to USD 77.10 per barrel, while Brent crude rose 76 cents to USD 80.28 per barrel. Gold, a traditional haven in times of uncertainty, surged past USD 2,500 an ounce, whereas other commodities like nickel, aluminum, and copper saw declines.

Worries are mounting that the Federal Reserve's prolonged high interest rates could stifle borrowing and economic expansion. A rate cut's effects might take months to a year to materialize, keeping markets on edge.