Global stock markets experienced a significant downturn on Monday as fears of a looming recession in the United States sent shockwaves through financial markets worldwide. Wall Street saw steep losses, while Tokyo recorded its worst day in over a decade. The Nigerian stock market also felt the impact, with a decline of 0.2%.
The Nasdaq Composite Index, which is heavily focused on technology stocks, fell more than 6% at the start of trading, although it later reduced its losses to a 2.8% drop by late morning. Similarly, the S&P 500 and the Dow Jones Industrial Average both fell by more than 2%. The sell-off was triggered by a weak U.S. jobs report, which indicated that the unemployment rate had reached its highest level since October 2021.
The report showed that the U.S. economy added just 114,000 jobs in the previous month, significantly lower than expectations and down from June’s figures. This added to investor concerns that the Federal Reserve’s decision to maintain interest rates at a 23-year high might lead to an economic recession instead of the desired “soft landing.”
In Nigeria, the stock market also suffered, albeit to a lesser extent. The Nigerian Exchange Limited (NGX) All Share Index fell from 97,745.73 points last Friday to 97,582.41 points on Monday. Additionally, the NGX market capitalization, which represents the total investment value of investors on the Exchange, decreased by over N97 billion, closing at N55.404 trillion.
Despite the overall decline, trading activity in Nigeria saw a surge, with a 53.63% increase in trading volume and a 57.36% rise in trading value. Zenith Bank led the way, accounting for 11.42% of the total volume traded and 21.41% of the total value traded. The increase in activity was partly due to a significant transaction involving 2.9 million units of Zenith Bank shares at N36.00 each earlier in the day.
In Nigeria, the market displayed mixed performance across different sectors. The Consumer Goods Index rose by 0.89%, driven by gains in Dangote Sugar, which increased by 5.88%. The Banking Index and Industrial Goods Index also saw slight upticks of 0.19% and 0.03%, respectively. However, the Insurance Index and Oil and Gas Index experienced minor declines due to selling pressure.
In Asia, Tokyo’s Nikkei index plummeted more than 12%, marking its worst day since the Fukushima crisis in 2011. Major European indices also closed down, with losses ranging from 1.5% to 2.0%.
The downturn in global markets was exacerbated by geopolitical concerns, particularly fears of Iranian retaliation against Israel following a high-profile military incident. Additionally, the strengthening of the Japanese yen, buoyed by a recent Bank of Japan interest-rate hike, contributed to volatility in the currency markets.
Chicago Federal Reserve President Austan Goolsbee attempted to calm fears by stating that the U.S. economy does not yet appear to be in recession. He emphasized the importance of the Federal Reserve monitoring economic conditions to avoid overly restrictive monetary policies. Goolsbee reassured that if conditions worsen, the central bank would take necessary measures to stabilize the economy.
Speculation is mounting that the Federal Reserve might consider cutting interest rates as early as September. Economist Steven Blitz noted that while an emergency rate cut is unlikely, another month of weak job data could prompt more aggressive action to prevent a recession.
The recent market turmoil has also entered the political arena, with former President Donald Trump criticizing Vice-President Kamala Harris and the Democratic Party for the economic downturn. Trump blamed the stock market sell-off on Harris, calling it the “Kamala crash.” He positioned himself as a more trusted figure on economic issues, potentially setting the stage for a contentious electoral battle if economic conditions continue to deteriorate.
As global markets navigate this period of uncertainty, investors and policymakers alike are closely watching for signs of stabilization or further economic distress. The coming weeks will be crucial in determining whether the current fears of recession will materialize into a more profound economic slowdown.
