The FTSE 100 tracked the US lower on Wednesday after poor US manufacturing data revived growth concerns ahead of Friday’s Non-farm payrolls.
Some investors are clearly petrified that a soft jobs report on Friday could see a rerun of the volatility in early August and want no part in it.
Slowing new manufacturing orders and rising inventories in the US yesterday spooked markets overnight and spurred investors to book profits in US technology shares, sending the S&P 500 down 2%.
“A near-10% one-day decline in Nvidia’s shares and a 3.3% drop in the Nasdaq index illustrate the fragility of the market. It goes to show that everything was not back to normal after markets quickly rebounded from their summer wobble, even thought it might have looked fine on the surface,” said Russ Mould, investment director at AJ Bell.
“Investors panicked over the summer about a potential US recession, causing markets to go through a rocky period which was compounded by the unwinding of the Yen carry trade where certain investors had borrowed in the low-interest Japanese currency to invest in higher-yielding assets elsewhere, including US tech shares.”
Such was the weight of concern: the FTSE 100 opened sharply lower and was trading down 0.5% at 8,252 at the time of writing after recovering from the worst levels.
With the US Non-Farm Payrolls just two days away, markets will be laser-focused on any global economic data that could be a precursor for the heightened volatility.
“Hirings, in the non-farm payrolls report, are expected to come in around 162,000 jobs for August, but if they are significantly lower than expected, it will do little to calm fears that a recession could be looming,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“Up to one percentage point of cuts from the Fed by the end of the year are currently being priced in by financial markets, and if further weak data comes through, a big bazooka cut of 50 basis points looks more likely.”
The selling of FTSE 100 shares on Wednesday was broad with 85% of the index in the red at the time of writing.
The selling was also fairly indiscriminate, with Airtel Africa sitting at the bottom of the leaderboard, followed closely by Convatec and Burberry.
With a 1% gain, Rolls Royce was the top gainer.