Money blog: Global shares plummet; US recession fear; UK lender slashes mortgage rates - with one at 3.49% (2024)

Major US stock indexes had made up some losses by the middle of the trading day around an hour ago.

The Dow Jones Industrial Average was down less than 800 points, or just short of 2%, after falling as much as 1,100 points earlier in the day.

The S&P 500 was down 2.2% after declining more than 3% earlier.

And the tech-focused Nasdaq was off 2.6% after declining as much as 4.3% to start the day.

Stocks were bolstered after a business-services report that signalled the US economy remained on firm footing.

Trump makes hay

The turbulence has been seized on by Donald Trump, who managed to turn it into a political issue and help get #kamalacrash trending on X.

On his Truth Social account, Trump posted "KAMALA CRASH!" followed quickly by "KAMALA CRASH vs. TRUMP CASH!"

Right-wing accounts on X including Libs of TikTok, RNC Research and End Wokeness were quick to follow as they attempted to portray the market drawdown as the result of Kamala Harris's recent surge in polls.

The turbulence in the US stock market isn't done yet.

Investors will be looking for signs of the market bottom, which is the lowest point in a market decline, or the turning point where selling stops and buying begins.

John Roque, the senior managing director of New York based asset management firm 22V, has picked out six signs to look out for that the market bottom is approaching.

1. The yen needs to stop strengthening against the dollar

The strengthening of the Japanese yen has ruined profits from carry trades, which is when investors sell something in one currency and buy something in another.

A settling down of the exchange rate, according to Mr Roque, would give carry-trade investors a "chance to catch their breath".

2. 'Leadership stocks need to stop going down'

High-performing and influential companies in the US stock market like Apple, Google, Amazon and Meta will need to see their stocks stabilise.

That would be a sign investors don't feel like raising more cash and are happy with the risk in their portfolios.

3. Stock indexes becoming oversold

A stock is regarded as oversold when it has suffered a sharp decline, and markets believe it may have become undervalued as a result.

When the Relative Strength Index (RSI) drops below 30, a stock or index is considered oversold.

4. Bond prices need to stop going up

The price of bonds moves inversely to interest rates - meaning they go up when the interest rates go low.

5. Changing rhetoric from the Federal Reserve

The Fed meets in Wyoming in Jackson Hole in late August to discuss the economy.

Talk coming out of that meeting about a rate cuts would "help investors' psyches", according to Mr Roque.

6. VIX volatility index peaking

The Cboe Volatility Index (VIX) is a key measure of expected volatility in the stock market and is often referred to as Wall Street's "fear gauge".

Once the VIX peaks and starts to fall down, market recovery can follow quickly. Currently, the VIX is up 245% over the past month.

Some financial analysts believe the market plunge in the US represents investors overreacting.

Economists, including Gregory Daco at EY, suggested today's events mark an outsized reaction to worry that the US Federal Reserve didn't lower interest rates fast enough.

"The market panic appears disproportionate," he wrote in a note to clients today.

"In our opinion, the core issue lies with the Fed being behind the curve, in action and in thought, rather than a significant economic downturn."

Furthermore, the chief economist at RSM US said it was a case of "classic market panic".

Joseph Brusuelas was also keen to point out that the market is not the same thing as the economy.

Stocks across the pond have recovered slightly from this morning's freefall but are still significantly down.

The US is "uncomfortably close" to a recession, a former Federal Reserve economist has said.

"We might not be there, but we're getting uncomfortably close," Claudia Sahm told Bloomberg TV.

The unexpected increase in US joblessness reported on Friday has been "in the past, consistent with 'early in recession'", she added.

Ms Sahm had a word of caution for policymakers, however, saying they should think before making quick decisions: "Calm is important at a moment like this."

The weak jobs report triggered the so-called Sahm Rule, an indicator of recession named after Ms Sahm.

A key measure of expected volatility in the US stock market surged to its highest level in more than four years today as global equities fell sharply.

TheCboe Volatility Index, or VIX, broke above 50 today, up from about 23 Friday and roughly 17 a week ago.

This is the highest the VIX has been since March 2020, shortly after the Federal Reserve'semergency actionsduring the COVID pandemic, according to FactSet.

The VIX rose as high as 85.47 in March 2020, according to FactSet.

A UK lender has said it will cut mortgage rates amid the market tumble we've been reporting on.

Effective from tomorrow, The Mortgage Works (TMW) will be reducing rates by up to 0.45 percentage points across its product range.

That means rates will start from as low as 3.49%.

New rates include:

• Two-year fixed rate (purchase and remortgage) buy-to-let at 3.49% with a 3% fee, available up to 65% LTV (reduced by 0.05%) 
• Five-year fixed rate (purchase and remortgage) limited company buy-to-let at 4.59% with a 5% fee, available up to 70% LTV (reduced by 0.25%)
• Five-year fixed rate (purchase and remortgage) limited company buy-to-let at 4.99% with a 3% fee, available up to 75% LTV (reduced by 0.30%)
• Two-year fixed rate (purchase and remortgage) limited company houses in multiple occupation (HMO) at 4.94% with a 3% fee, available up to 75% LTV (reduced by 0.45%)

Will other lenders follow suit?

"These sizeable cuts from TMW could set the tone among the wider lending community," Riz Malik, director at R3 Mortgages, told Newspage.

"If the US sell-off continues, and given the current geo-political backdrop, there is the potential for some deep cuts from major lenders this week and into next.

"However, lenders may wait to see if this is a short-term blip before they commit to repricing products and getting inundated with business during the holiday season."

We've reported extensively on forecasts for rate cuts here in the UK over the last year - and that is one of the big talking points in the US right now.

Just last week the Fed held the main interest rate stateside as the economy looked robust - but the odds have now dramatically shifted on the future path.

Markets are now pricing in a 90% chance of a cut in September.

In fact, after the lacklustre July jobs report on Friday, odds shifted quickly to a 75% chance of a 0.50% interest rate cut.

Our US partner network NBC News is reporting that markets are now pricing in 8.5% odds that the Fed could even cut by an oversized 0.75%.

"The immediate implication is that investors fear that the economy may weaken rapidly and want the Fed to cut rates aggressively to maintain economic growth," Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, wrote in a note today.

As we have been discussing, big movement on rates in the US could prompt similar action here in the UK as central banks tend to move in unison.

With the Dow Jones Industrial Average currently seeing losses of more than 950 points, every single stock in the Dow is in the red. Intel and Amazon are among the worst hit. P&G and Coca-Cola are among the best performers, just slightly lower.

The Nasdaq 100 index has just two stocks in the green, ON Semiconductor and Advanced Micro Devices. But some major names such as chipmaker Arm Holdings, Nvidia and Tesla are sharply lower.

On the S&P 500, cereal and snack food company Kellanova is up double digits as CNBC reports that rival food company Mars is in talks to acquire it.

Tyson Foods, Arm and Hammer-owner Church & Dwight, Tractor Supply, Autozone and Clorox are some of the bright spots on the index. Casears, Etsy and Warner Bros. Discovery are some of the worst performers.

Back onto the main news of the day, and some UK consumers could reap benefits from a potential US recession, an analysts has suggested.

Shares have tumbled across the globe today on fears the US economy may not be as robust as it perhaps looked a few weeks ago.

Janet Mui, head of market analysis at investment management firm RBC Brewin Dolphin, has been providing commentary of this story on Sky News this afternoon and says a "confluence of factors that is dragging down the stock market".

Firstly, US job creation was "much lower than analysts expected" in July.

Second, in "the latest US corporate earnings season, quite a few company executives were saying that consumers are seeing more weakness and they're guiding that consumer spending could be slowing down from here".

Ms Mui says this is a "big concern for markets".

Finally, "we have seen some reversal in the very sharp gains in US technology stocks... some analysts are worried about a potential overspending on artificial intelligence investment and the commercialisation and profitability of that".

Nvidia and Apple are among notable fallers in all of this.

Having explained the reasons for the market turbulence, Ms Mui moved on to the potential consequences - and suggested there could be some "positive implications" for consumers.

If the US Fed starts moving interest rates down, the European Central Bank and Bank of England "will certainly feel that pressure to cut interest rates further".

"If you have a floating rate mortgage, you could potentially see more relief down the line.

"And if you're going to remortgage or have a new mortgage, I think you're very likely to be getting a much lower rate."

Ms Mui said two-year swap rates, which the UK mortgage rates are based on, have "fallen very sharply".

Further, she says oil prices have been "plunged" in response to US recession fears.

"I think consumers are likely to see lower petrol prices and potentially benefit from lower energy costs as well."

By Sarah Taaffe-Maguire, business reporter

Back onto our headline story now, and as expected US market values fell when they opened at 2.30pm UK time.

It was, of course, fears over the US economy and performance of US-based companies that started the global sell off on Thursday.

The numbers are big. The Nasdaq fell more than 4%, the S&P 500 more than 3%, the Dow Jones Industrial Average (DJIA) more than 2%.

That S&P fall equalled a roughly £1.87trn wipeout from the combined value of its constituent companies.

The sharp drops seen by the three major indexes at the open are fading a bit.

The Dow is down about 1,000 points now, and the S&P 500 is down less than 2.9%. The Nasdaq, which tracks some of the biggest tech firms, is still facing the worst losses but has pulled back and is currently down less than 3.8%.

It all needs to be taken in some context. Many tech company values had reached new highs in the past few months as investors bet on AI investment. With those company values up, indexes that heavily comprised tech firms, such as the Nasdaq, reached an all-time high less than a month ago. We're seeing sharp falls but they're coming from record highs, in some instances.

There's some good news in all the declines. Oil prices, for example, are the cheapest they've been since December - a barrel of Brent crude oil now costs $76.62.