Pension funds and savers’ investments took a hit yesterday as global stock markets fell sharply on fears of a US recession.
Global stock prices fell as investors worried about a possible slowdown in the world’s largest economy.
The sell-off was partly driven by concerns that artificial intelligence was getting too much attention after U.S. technology stocks posted huge gains this year.
Alphabet, which owns Google, and Meta, the parent company of Facebook, were among the companies hardest hit by the market crash.
Apple’s share price also fell after billionaire investor Warren Buffett cut his stake in the iPhone maker by more than $50 billion (£39 billion).
Pension funds and savers’ investments took a hit as global stock markets fell sharply on fears of a US recession (stock image)
Apple’s share price also fell after billionaire investor Warren Buffett cut his stake in the iPhone maker by more than $50 billion (£39 billion)
Shares of computer chip maker Nvidia, which briefly became the world’s most valuable company earlier this year thanks to the AI boom, also fell.
Rupert Thompson, chief economist at asset manager IBOSS, said: “While these companies are in much better shape than their equivalents during the 2000s tech bubble, the optimism around AI was overblown and valuations were too high.”
Yesterday’s unrest sent Japan’s stock market suffering its biggest one-day drop since “Black Monday” in 1987.
Market turmoil was fueled by US economic data last week that raised doubts about policymakers’ ability to curb inflation while avoiding a recession.
On Friday, it was reported that US employers created fewer jobs than expected and that unemployment reached its highest level since October 2021. Analysts accused the US Federal Reserve, the country’s central bank, of cutting interest rates too late.
The Fed kept interest rates at a 20-year high of 5.25 percent to 5.5 percent at its last meeting, but is expected to announce a cut in September.
However, some traders yesterday bet that US policymakers would make an emergency decision to cut borrowing costs before their next meeting.
Google owner Alphabet and Facebook’s parent company Meta were among the companies hardest hit by the market crash
The FTSE 100 fell more than three percent, its biggest fall so far this year
Meanwhile, the FTSE 100 – which tracks London’s largest listed companies – fell more than three percent in its biggest fall so far this year. The blue-chip index recovered some of its losses to close down 2.04 percent last night.
Well-known names including high street banks Barclays, NatWest and Lloyds were among the shares that fell. Asia-focused HSBC – Europe’s biggest bank – fell 1.65 percent.
Some of the day’s biggest losers were London-listed trusts holding shares in U.S. tech companies. Pershing Square Holdings, which invests in North American stocks, fell as much as 8.29 percent before paring its losses to a 2.95 percent drop.
Scottish Mortgage Investment Trust, which has stakes in Nvidia, semiconductor industry supplier ASML and Amazon, saw its share price fall by almost 10 percent, closing down 5.56 percent.
Danni Hewson, head of financial analysis at AJ Bell, said: “It’s hard not to panic when you look at the headlines, but corrections always happen and if we look back to the start of the year, the FTSE350 is still in a better position than it will be in 2024.”