Global stock markets ended the week in a sharp decline as fears of a looming recession intensified among investors. Big Tech’s massive investments in artificial intelligence, once hailed as transformative, are now under scrutiny following disappointing earnings reports from companies like Amazon and Intel. This turmoil was palpable, with Intel suffering its worst trading day since the 2000 dot-com bubble burst, shedding about 20% due to poor earnings, suspended dividends, and significant job cuts. This volatility also rippled through bond markets, with Treasury yields plummeting and the VIX ‘fear index’ surpassing 20 for the first time since April.

Despite sidestepping a recession in 2023, the outlook for 2024 appears grim, with experts now predicting a mild downturn or a soft landing at best. The latest U.S. employment report revealed lackluster job growth in July and an unemployment rate climbing to 4.3%, further stoking recession fears. However, some analysts argue that these indicators might be misleading. The Federal Reserve’s interest rate decisions remain a critical focus, with markets increasingly betting on significant rate cuts by September. This sentiment reverberates globally, as European and Asian markets also show signs of distress, and central banks, including the Bank of England, initiate rate cut cycles, highlighting the potential for a widespread economic slowdown.

Amid this global economic uncertainty, the Kenyan shilling has been experiencing considerable volatility, recently dipping to 131 against the dollar. The decline is attributed to a mix of domestic factors, including recent protests that have disrupted trade and tourism, as well as broader economic pressures such as the rising dollar and global recession fears. The shilling’s instability is further evidenced by its fluctuations against other major currencies like the Sterling pound and Euro. As investors brace for continued market turbulence, the performance of the shilling will be closely monitored along with key economic reports and Federal Reserve decisions. The interplay of global market dynamics and local economic conditions will be crucial in shaping the financial landscape in the coming weeks, with the Kenyan economy facing additional pressures from inflation and debt servicing costs.

References:

The Guardian Fear of US recession rattles global markets as tech shares fall

The Economic Times Is there a fear of recession in the U.S? Here’s all you need to know

Reuters Morning Bid: Rethinking recession risks and AI, markets take fright

CNBC The U.S. avoided a recession in 2023. What’s the outlook for 2024? Here’s what experts are predicting

Market Watch Recession fears fuel swings in interest-rate expectations and 2-year Treasury yield

PBS News Unemployment rise shakes stock markets, yet recession signals have been wrong — so far

CBC Global stock markets end week in a slump over fears of U.S. recession