European stocks are poised to open significantly lower on Friday as recession fears dominate market sentiment.
On Thursday, newly released manufacturing and labor market data from the United States exacerbated concerns about a potential recession and raised apprehensions that the Federal Reserve might delay interest rate cuts.
Adding to the caution, Asian factories reported weak performance last month, and the eurozone’s manufacturing sector experienced another setback at the beginning of the third quarter. This situation increases the risk of a sluggish global economic recovery.
Asian markets experienced their most severe decline since 2022, with Japan’s Nikkei plummeting nearly 5% due to significant losses in technology stocks and a strengthening yen that clouded the outlook for the nation's exporters.
The dollar stabilized, and the rally in Treasuries continued for a seventh consecutive day. Investors eagerly await the U.S. Labor Department’s highly anticipated employment report for July, which is expected to provide further insights into the state of the economy and the Federal Reserve’s rate decisions.
Economists predict a moderation in job growth with the unemployment rate expected to hold steady at 4.1%.
On the corporate earnings front, online retailer Amazon disappointed Wall Street with its outlook for the current quarter. Chipmaker Intel announced drastic plans to reduce its workforce and cut capital spending. Meanwhile, Apple exceeded expectations despite recording its worst iPhone sales in years.
Energy giants Exxon Mobil and Chevron are scheduled to report their quarterly earnings before the U.S. market opens later today.
Gold prices inched higher in Asian trading amid optimism over potential rate cuts. Oil prices edged up slightly but remained on track for a fourth consecutive weekly decline, as demand concerns outweighed fears of an escalating Middle East crisis.
U.S. stocks tumbled overnight after weak economic data reignited recession concerns, overshadowing positive earnings reports from Meta Platforms, the parent company of Facebook, and optimism about a near-term interest rate cut by the Federal Reserve.
Early gains evaporated as data indicated a sharp contraction in manufacturing activity in July and weekly jobless claims reaching an 11-month high. The tech-heavy Nasdaq Composite lost 2.3%, the S&P 500 declined 1.4%, and the Dow dipped 1.2%.
European stocks also fell sharply on Thursday following the release of downbeat Eurozone PMI and unemployment data. Concurrently, the Bank of England cut rates for the first time in over four years and signaled further cautious reductions ahead.
The pan-European STOXX 600 dropped 1.2%, Germany's DAX slumped 2.3%, France's CAC 40 plummeted 2.1%, and the U.K.'s FTSE 100 declined by 1%.
