U.S. recession fears spark selloff in international markets

LONDON — U.S. stocks are on course to open in the red Monday, with Japanese stocks suffering their worst day of trading since the 1980s and a global equities sell-off intensifying over fears of a U.S. economic slowdown.

In pre-market futures trading, the Dow Jones Industrial Average dropped by 1.4%, the S&P 500 was down 2.2% and the tech-stocks-heavy Nasdaq was set to slide by 3.5% at the open. 

That’s mild compared with the pounding Asian markets received overnight, though. The Nikkei’s 12.4% fall marked the worst day for the Japanese index since 1987’s “Black Monday” — the sudden and unexpected stock market crash that raised fears of a depression.

Most major indices in Europe were most recently between 2% and 3% down, with the Stoxx Europe 600, Europe’s benchmark stock index, falling 2.2%. 

All of that follows on from brutal Friday trading, when a much weaker than expected U.S. jobs report made worse a market selloff that has been underway for some weeks now, although some indexes, such as the Nasdaq, are coming off recent record highs. 

In recent weeks, rising concerns around a potential U.S. recession have spooked investors. Many in the market are now concerned that the Federal Reserve has been too cautious over cutting interest rates — doing so makes money easier to borrow and move more freely — and will now need to catch up with other global central banks, which have moved first.

Japan’s early-week selloff prompted Japan’s finance minister Shunichi Suzuki to speak to the media, telling the press that he and his colleagues “will continue to monitor domestic and international economic and financial market trends with a firm sense of urgency.”

Suzuki added that, despite Monday’s selling, the Japanese economy is in relatively good health when compare with recent years.

“We have seen the highest wage increase in 33 years during this year’s Spring Labor Negotiations, also capital investment has exceeded over 100 trillion yen, and the stock market has reached a historical high, all of which are positive developments,” he said.

A rise in the value of the Japanese yen against the U.S. dollar — making Japanese assets more expensive for holders of other currencies — has also likely played a role in the selling.

Even so, some investors put their money into U.S. Treasury bonds — so-called ‘haven’ assets that act as stores of wealth in volatile moments.