Asian shares have suffered their worst day in over two years, with Japan’s Nikkei tumbling more than 5%, as weaker-than-expected US factory data sparked fears of a worsening economic outlook. The dour mood is expected to continue into Europe, with EUROSTOXX 50 futures falling 0.8% and FTSE futures little changed.
US Treasury yields have slid, and stock futures have extended their declines, with Nasdaq futures tumbling 1.35% and S&P 500 futures falling 0.76%. The closely watched non-farm payrolls report, due later today, will provide further clues on the health of the US labor market and the broader economy.
Fears of an economic downturn have led investors to worry that the Federal Reserve may be behind the curve in cutting rates, with futures pointing to a roughly 29% chance of a 50-basis-point cut in September.
The yen has edged 0.12% higher to 149.18 per dollar, hovering near an over four-month high, while the Swiss franc has risen to its strongest level since early February. Oil prices have edged higher, but are set for a fourth weekly decline, while spot gold has firmed 0.55% to $2,458.99 an ounce.
The global market slump comes after weaker-than-expected US factory data, which showed a measure of US manufacturing activity dropped to an eight-month low in July. Geopolitical tension has also weighed on sentiment, after the Israeli military said the head of Hamas’ military wing was killed in an Israeli airstrike in Gaza last month.
Investors are bracing for further volatility, with the focus now on the non-farm payrolls report and the potential for further rate cuts from the Federal Reserve.