Global stock market rout gathers pace as fears of US recession grow – after bloodbath in Japan

Stock markets around the world continued to fall on Monday on fears that the U.S. economy is heading for a recession, while Japan suffered its worst sell-off since “Black Monday” in 1987.

According to experts at investment bank Goldman Sachs, the chance of a recession in the US is now as high as 25 percent. That is ten percent more than their previous estimate of 15 percent. JP Morgan, however, estimates the chance of a recession at 50 percent.

U.S. stock index futures fell sharply on Monday, with futures tied to the Nasdaq down nearly 4 percent. However, traders are now increasingly betting that the Federal Reserve will announce an emergency interest rate cut in response to the global stock market crash and to prevent a massive recession.

A circuit breaker is a temporary interruption of trading when stock indices fall too far.

If the S&P 500 falls by 7 percent at the closing price of the last trading day, a 15-minute trading pause follows.

If there is a 13 percent drop before 3:25 p.m., there will be a second 15-minute break.

If the index falls by 20 percent, the markets close for the day.

Circuit breakers are common in individual stocks, but extremely rare in the major indices.

The last time they were seen for indexes like the S&P 500 was during the early stages of the pandemic.

Shares of Nvidia fell 14 percent in pre-market trading ahead of the 9:30 a.m. New York time opening.

That wipes out nearly $360 billion in market capitalization from the AI ​​stock darling.

That would be the greatest destruction of market value ever.

The stock’s value has soared this year due to the hype surrounding artificial intelligence.

S&P 500 futures fell 3.1 percent and Nasdaq futures fell 4.7 percent.

Investors are fleeing the Big Tech names that until recently were driving the U.S. market higher: Apple fell more than 7 percent and Meta fell 6 percent in premarket trading. Chipmaker Nvidia fell 12.5 percent.

The losses in the Magnificent Seven shares would wipe nearly $1 trillion off the companies’ combined market value.

After more than a year of Wall Street gains, big tech stocks have come under pressure in recent weeks amid signs that the massive investments in AI are taking longer to pay off than some investors had initially hoped.

Shares of Amazon, Microsoft and Alphabet, the three largest providers of cloud computing services, fell as their earnings reports undercut big investments in AI, which quickly translated into growth.

A leading economist has issued a dire warning about the US economy, criticizing the Federal Reserve for a “policy blunder” that could plunge the country into recession.

Allianz’s chief economic adviser Mohamed El-Erian said on Sunday he fears the economy is entering a downward spiral after a dismal unemployment report last week.

He blames the Fed for keeping its key interest rate at its highest level in two decades since 2022 in an effort to keep inflation in check.