Stay informed with free updates
Simply sign up to the US equities myFT Digest — delivered directly to your inbox.
Global stocks tumbled on Tuesday, weighed down by declines on Wall Street, as weak manufacturing data renewed investors’ concerns over a slowdown for the US economy.
The S&P 500 index sank 1.4 per cent, with the blue-chip benchmark now more than 1.5 per cent off its all-time closing high hit in mid-July. Technology stocks fell even further, with the Nasdaq Composite down 2.4 per cent — its biggest fall since the market plunge in early August — and the Philadelphia Semiconductor index more than 5 per cent lower.
The Institute for Supply Management’s gauge of US manufacturing activity for August came in slightly weaker than expected, shrinking for a fifth consecutive month and heightening fears that the US may be entering a downturn.
The numbers “underwhelmed” and “there wasn’t anything encouraging in the data”, said Ian Lyngen, head of US rates strategy at BMO Capital Markets.
The ISM release was closely watched by investors as the previous month’s much lower than expected reading helped drive the stock market plunge in early August.
Tuesday’s release comes ahead of Friday’s crucial US non-farm payrolls figures, which could provide a strong indicator on whether the US Federal Reserve will cut interest rates by a quarter or a half percentage point later this month.
Bank of America said a quarter point cut remains the base case but “a very weak August jobs report would change the game by validating recession fears.
“History suggests that the Fed would respond aggressively, even if inflation is moderately above target,” said BofA.
The policy-sensitive two-year Treasury yield fell 0.05 percentage points to 3.88 per cent, while the 10-year yield fell 0.06 percentage points to 3.85 per cent. Yields fall as prices rise.
Across the Atlantic, the region-wide Stoxx Europe 600 index fell 1 per cent, further retreating from Friday’s all-time high, while London’s FTSE 100 dropped 0.8 per cent.
Brent crude, the global oil benchmark, hit its lowest level of the year, falling 4.4 per cent to $74.15 a barrel, while West Texas Intermediate, the US benchmark, slid 3.7 per cent to $70.81.
The falls came amid speculation that a deal to end a dispute between political factions in Libya would help to restore production in the region.
Souring sentiment further was the recent “sluggish factory purchasing managers’ index data out of China”, a major crude importer, said broker Fearnley Securities.
