Pension funds and savers’ investments suffered a severe blow yesterday as global stock markets fell sharply due to fears of a US recession.
Share prices fell around the world as investors fretted over the possibility of a slowdown in the world’s largest economy.
The sell-off was also partly motivated by concerns that artificial intelligence may have been overhyped after US tech stocks made huge gains this year.
Google owner Alphabet and Facebook parent Meta were among the companies hit hard by the market downturn.
Apple’s share price also fell after billionaire investor Warren Buffett cut his stake in the iPhone maker by more than $50bn (£39bn).
Pension funds and savers’ investments have suffered a severe blow due to the sharp fall in global stock markets due to fears of a recession in the United States (file image)
Apple’s share price also fell after billionaire investor Warren Buffett cut his stake in the iPhone maker by more than $50bn (£39bn).
Shares of computer chipmaker Nvidia, which was briefly the world’s most valuable company earlier this year thanks to the rise of artificial intelligence, also fell.
Rupert Thompson, chief economist at asset management firm IBOSS, said: “While these companies are much better positioned than their counterparts in the 2000 tech bubble, AI-related optimism had become overblown and valuations too high.”
Yesterday’s turmoil caused the Japanese stock market to suffer its biggest one-day drop since Black Monday in 1987.
The market turmoil was triggered by U.S. economic data last week that raised questions about policymakers’ ability to slow inflation and avoid a recession.
Official figures showed on Friday that US employers added fewer jobs than expected and unemployment was the highest since October 2021. Analysts accused the US Federal Reserve, the country’s central bank, of waiting too long for an interest rate cut.
The Federal Reserve held rates at a two-decade 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 were betting yesterday that US authorities would take an emergency decision to reduce borrowing costs before the next meeting.
Google owner Alphabet and Facebook parent Meta were among the companies hit hard by the market downturn.
The FTSE 100 fell more than three per cent in its biggest drop so far this year.
Meanwhile, the FTSE 100, which tracks the performance of the largest companies listed in London, plunged more than 3%, its biggest fall so far this year. The index of leading companies recovered some of its losses and closed last night down 2.04%.
Among the stocks that lost value were those of major banks such as Barclays, NatWest and Lloyds. HSBC, Europe’s largest bank and based in Asia, fell by 1.65%.
Some of the biggest losers of the day were London-listed trusts holding shares in US technology companies. Pershing Square Holdings, which invests in North American stocks, fell as much as 8.29 percent before paring its losses and closing down 2.95 percent.
The share price of Scottish Mortgage Investment Trust, which owns stakes in Nvidia, semiconductor supplier ASML and Amazon, fell almost 10 percent to close down 5.56 percent.
Danni Hewson, head of financial research at AJ Bell, said: “It’s hard not to look at the headlines and succumb to panic, but corrections do happen and, looking back from the start of the year, the FTSE350 is still in a better position than it was in 2024.”
