European Shares Set To Drift Lower As Recession Fears Swirl

European stocks are seen opening notably lower on Friday as recession worries gripped markets.

Newly released manufacturing and labor market data in the United States on Thursday heightened concerns about a potential recession and worries that the Federal Reserve might be slow in cutting interest rates.

Asian factories turned in a weak performance last month and the eurozone’s manufacturing sector suffered yet another setback at the start of the third quarter, raising the risk of an underpowered global economic recovery.

Asian markets tumbled in their biggest drop since 2022, with Japan’s Nikkei plummeting nearly 5 percent as technology stocks suffered heavy losses and a strengthening yen clouded the outlook for the country’s exporters.

The dollar steadied and a rally in Treasuries extended into a seventh straight day as investors await the U.S. Labour Department’s closely watched employment report for July later in the day for further clues about the state of the economy and the Fed’s rate path.

Economists expect moderation in job growth while the unemployment rate is expected to remain steady at 4.1 percent.

On the earnings front, online retailer Amazon disappointed Wall Street with its outlook for the current quarter.

Chipmaker Intel revealed drastic plans to slash its employee headcount and capital spending, while Apple beat expectations despite posting worst iPhone sales in years.

Energy giants Exxon Mobil and Chevron are due to report their quarterly results before the U.S. opening bell later today.

Gold ticked higher in Asian trade on rate cut optimism. Oil edged up slightly but was on course for a fourth weekly fall as demand concerns overshadowed worries of a broadening Middle East crisis.

U.S. stocks tumbled overnight as a fresh dose of weak economic data reignited recession fears and offset upbeat earnings news from Facebook parent Meta Platforms and optimism about a near-term interest rate cut by Federal Reserve.

Early gains evaporated as data showed manufacturing activity contracted sharply in July and weekly jobless claims jumped to an 11-month high.

The tech-heavy Nasdaq Composite lost 2.3 percent, the S&P 500 declined 1.4 percent and the Dow dipped 1.2 percent.

European stocks also fell sharply on Thursday after the release of downbeat Eurozone PMI and unemployment data.

Meanwhile, the Bank of England cut rates for the first in over four years and signaled further cautious reductions ahead.

The pan European STOXX 600 dropped 1.2 percent. The German DAX slumped 2.3 percent, France’s CAC 40 plummeted 2.1 percent and the U.K.’s FTSE 100 gave up 1 percent.

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