Fears of a US economic slowdown ignited a significant sell-off in global stock markets yesterday, following an unexpected decline in American hiring and a rise in the unemployment rate for the fourth consecutive month.

The weak labor data and the US Federal Reserve’s decision to maintain interest rates at a 23-year high of 5.25 to 5.5 percent heightened concerns about growth in the world’s largest economy. This also increased the likelihood that the Federal Reserve might have to take action at its September meeting, similar to the Bank of England’s recent rate cut.

The latest figures from the Labor Department revealed that employers added only 114,000 jobs in July, which was 35 percent lower than forecasts, pushing the unemployment rate to 4.3 percent, the highest since October 2021.

Stephen Brown, deputy chief North American economist at Capital Economics, commented, “The sharp slowdown in payrolls in July and an increase in the unemployment rate make a September interest rate cut inevitable, and heighten speculation that the Fed might initiate its loosening cycle with a 50-basis-point cut or even an intra-meeting move.”

Financial markets reacted strongly to the jobs report, with traders pricing in a 63 percent chance of a 0.5 percent rate cut by the Fed, up from 22 percent the previous day.

Investors were already uneasy due to disappointing earnings updates from Amazon and Intel. Following the results, Japan’s Nikkei 225 experienced its largest one-day decline since October 20, 1987, which continued into European markets, where major exchanges opened negatively.

In London, the FTSE 100 dropped 108.65 points, or 1.3 percent, to 8,174.71, marking its steepest weekly decline since mid-January. The Stoxx Europe 600 index saw its biggest daily drop since March 2022, with Germany and France’s leading indices falling 2.3 percent and 1.6 percent, respectively.

In the UK government bond market, two-year gilt prices soared, driving yields down by 28 basis points. Similarly, ten-year gilt yields fell. Brent crude, the global oil price benchmark, declined by 1.4 percent to just over $78 a barrel.

Wall Street also opened sharply lower, continuing the flight from equities. By closing, the tech-heavy Nasdaq Composite plummeted 417.98 points, or 2.4 percent, to 16,776.16, officially entering correction territory with a drop of over 10 percent from its peak on July 10. The S&P 500 fell 1.8 percent to 5,346.56, concluding its worst week since mid-April, while the Dow Jones Industrial Average tumbled 610.71 points, or 1.5 percent, to 39,737.26, ending a four-week winning streak.

The yield on two-year US Treasury bonds fell below 4 percent for the first time since May 2023, dropping 0.28 percentage points to 3.88 percent in midday trading.