Explained: What Led To Global Equities Bloodbath?

A global sell-off has led to a major bloodbath in the equity markets as corporate giants stared down at massive losses. The US markets fell over 2.43% on Friday while the Asian peers added to their losses as they opened after the weekend.

Both the Indian indexes were trading 3% in the red at their lowest on Monday. Sensex had slipped below the 80,000-level for the first time in about four weeks - marking the worst fall since the share markets tumbled over 4,300 points on June 4, the election results day.

The massive drop that erased billions of dollars in investor wealth worldwide came after the US jobs data fanned fears of a recession.

The labour market data, which came after the Indian market hours but just in time before the US closing, showed the world's biggest economy added just 114,000 jobs last month - below the June figures and much lower than expected. The jobless rate in the US had risen to its highest level since October 2021, it showed.

It also boosted bets on several Federal Reserve interest rate cuts.

Analysts at Goldman Sachs said they have increased their 12-month recession odds by 10 percentage points. "The premise of our forecast is that job growth will recover in August and the FOMC will judge 25bp cuts a sufficient response to any downside risks. If we are wrong and the August employment report is as weak as the July report, then a 50bp cut would be likely in September," Reuters cited them as saying.

On Friday, the jobs data erased the gains from the lacklustre factory data that had come a day before and sparked losses in the US markets. Tech heavyweights like Amazon and Microsoft took the brunt.

What aggravated the situation was the simmering tensions between Iran and Israel that has already given hints of a full-blown war. The escalation came after a top Hamas leader was assassinated when he was in Tehran to attend a government event.

Axios, an American news website, has cited a warning from top diplomat Antony Blinken that Iran could launch an attack on Israel as early as today. There were reports Israel could also sanction a preemptive strike on Iran to prevent any attack on their soil.

The Asian markets, back from the weekend, woke up with Monday blues. Tokyo led the collapse with Nikkei plunging over 12%, its worse since 2011, while Seoul and Taipai tanked over 8% each. Singapore shed nearly 5% and Sydney fell more than 3%.

The Indian equity market too opened in the red this morning with Sensex falling 2,600 points at one point and Nifty shedding over 700 points. 

The US markets will open this evening after the weekend break.