Money blog: Global shares plummet; US recession fear; UK lender slashes mortgage rates - with one at 3.49% (2024)

Some financial analysts believe the market plunge in the US represents investors overreacting.

Economists, including Gregory Daco at EY, suggested today's events mark an outsized reaction to worry that the US Federal Reserve didn't lower interest rates fast enough.

"The market panic appears disproportionate," he wrote in a note to clients today.

"In our opinion, the core issue lies with the Fed being behind the curve, in action and in thought, rather than a significant economic downturn."

Furthermore, the chief economist at RSM US said it was a case of "classic market panic".

Joseph Brusuelas was also keen to point out that the market is not the same thing as the economy.

Stocks across the pond have recovered slightly from this morning's freefall but are still significantly down.

The US is "uncomfortably close" to a recession, a former Federal Reserve economist has said.

"We might not be there, but we're getting uncomfortably close," Claudia Sahm told Bloomberg TV.

The unexpected increase in US joblessness reported on Friday has been "in the past, consistent with 'early in recession'", she added.

Ms Sahm had a word of caution for policymakers, however, saying they should think before making quick decisions: "Calm is important at a moment like this."

The weak jobs report triggered the so-called Sahm Rule, an indicator of recession named after Ms Sahm.

A key measure of expected volatility in the US stock market surged to its highest level in more than four years today as global equities fell sharply.

TheCboe Volatility Index, or VIX, broke above 50 today, up from about 23 Friday and roughly 17 a week ago.

This is the highest the VIX has been since March 2020, shortly after the Federal Reserve'semergency actionsduring the COVID pandemic, according to FactSet.

The VIX rose as high as 85.47 in March 2020, according to FactSet.

A UK lender has said it will cut mortgage rates amid the market tumble we've been reporting on.

Effective from tomorrow, The Mortgage Works (TMW) will be reducing rates by up to 0.45 percentage points across its product range.

That means rates will start from as low as 3.49%.

New rates include:

• Two-year fixed rate (purchase and remortgage) buy-to-let at 3.49% with a 3% fee, available up to 65% LTV (reduced by 0.05%) 
• Five-year fixed rate (purchase and remortgage) limited company buy-to-let at 4.59% with a 5% fee, available up to 70% LTV (reduced by 0.25%)
• Five-year fixed rate (purchase and remortgage) limited company buy-to-let at 4.99% with a 3% fee, available up to 75% LTV (reduced by 0.30%)
• Two-year fixed rate (purchase and remortgage) limited company houses in multiple occupation (HMO) at 4.94% with a 3% fee, available up to 75% LTV (reduced by 0.45%)

Will other lenders follow suit?

"These sizeable cuts from TMW could set the tone among the wider lending community," Riz Malik, director at R3 Mortgages, told Newspage.

"If the US sell-off continues, and given the current geo-political backdrop, there is the potential for some deep cuts from major lenders this week and into next.

"However, lenders may wait to see if this is a short-term blip before they commit to repricing products and getting inundated with business during the holiday season."

We've reported extensively on forecasts for rate cuts here in the UK over the last year - and that is one of the big talking points in the US right now.

Just last week the Fed held the main interest rate stateside as the economy looked robust - but the odds have now dramatically shifted on the future path.

Markets are now pricing in a 90% chance of a cut in September.

In fact, after the lacklustre July jobs report on Friday, odds shifted quickly to a 75% chance of a 0.50% interest rate cut.

Our US partner network NBC News is reporting that markets are now pricing in 8.5% odds that the Fed could even cut by an oversized 0.75%.

"The immediate implication is that investors fear that the economy may weaken rapidly and want the Fed to cut rates aggressively to maintain economic growth," Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, wrote in a note today.

As we have been discussing, big movement on rates in the US could prompt similar action here in the UK as central banks tend to move in unison.

With the Dow Jones Industrial Average currently seeing losses of more than 950 points, every single stock in the Dow is in the red. Intel and Amazon are among the worst hit. P&G and Coca-Cola are among the best performers, just slightly lower.

The Nasdaq 100 index has just two stocks in the green, ON Semiconductor and Advanced Micro Devices. But some major names such as chipmaker Arm Holdings, Nvidia and Tesla are sharply lower.

On the S&P 500, cereal and snack food company Kellanova is up double digits as CNBC reports that rival food company Mars is in talks to acquire it.

Tyson Foods, Arm and Hammer-owner Church & Dwight, Tractor Supply, Autozone and Clorox are some of the bright spots on the index. Casears, Etsy and Warner Bros. Discovery are some of the worst performers.

Back onto the main news of the day, and some UK consumers could reap benefits from a potential US recession, an analysts has suggested.

Shares have tumbled across the globe today on fears the US economy may not be as robust as it perhaps looked a few weeks ago.

Janet Mui, head of market analysis at investment management firm RBC Brewin Dolphin, has been providing commentary of this story on Sky News this afternoon and says a "confluence of factors that is dragging down the stock market".

Firstly, US job creation was "much lower than analysts expected" in July.

Second, in "the latest US corporate earnings season, quite a few company executives were saying that consumers are seeing more weakness and they're guiding that consumer spending could be slowing down from here".

Ms Mui says this is a "big concern for markets".

Finally, "we have seen some reversal in the very sharp gains in US technology stocks... some analysts are worried about a potential overspending on artificial intelligence investment and the commercialisation and profitability of that".

Nvidia and Apple are among notable fallers in all of this.

Having explained the reasons for the market turbulence, Ms Mui moved on to the potential consequences - and suggested there could be some "positive implications" for consumers.

If the US Fed starts moving interest rates down, the European Central Bank and Bank of England "will certainly feel that pressure to cut interest rates further".

"If you have a floating rate mortgage, you could potentially see more relief down the line.

"And if you're going to remortgage or have a new mortgage, I think you're very likely to be getting a much lower rate."

Ms Mui said two-year swap rates, which the UK mortgage rates are based on, have "fallen very sharply".

Further, she says oil prices have been "plunged" in response to US recession fears.

"I think consumers are likely to see lower petrol prices and potentially benefit from lower energy costs as well."

By Sarah Taaffe-Maguire, business reporter

Back onto our headline story now, and as expected US market values fell when they opened at 2.30pm UK time.

It was, of course, fears over the US economy and performance of US-based companies that started the global sell off on Thursday.

The numbers are big. The Nasdaq fell more than 4%, the S&P 500 more than 3%, the Dow Jones Industrial Average (DJIA) more than 2%.

That S&P fall equalled a roughly £1.87trn wipeout from the combined value of its constituent companies.

The sharp drops seen by the three major indexes at the open are fading a bit.

The Dow is down about 1,000 points now, and the S&P 500 is down less than 2.9%. The Nasdaq, which tracks some of the biggest tech firms, is still facing the worst losses but has pulled back and is currently down less than 3.8%.

It all needs to be taken in some context. Many tech company values had reached new highs in the past few months as investors bet on AI investment. With those company values up, indexes that heavily comprised tech firms, such as the Nasdaq, reached an all-time high less than a month ago. We're seeing sharp falls but they're coming from record highs, in some instances.

There's some good news in all the declines. Oil prices, for example, are the cheapest they've been since December - a barrel of Brent crude oil now costs $76.62.

A popular Cadbury's bar has been disappearing from supermarket shelves due to "temporary supply challenges".

Some of you might have noticed Darkmilk has been increasingly harder to come across...

A spokesperson for Mondelez International, which owns Cadbury, said the company was "working hard" to resolve the issue.

"Cadbury Darkmilk is a core part of our range, and remains popular with consumers," they said.

"We are aware of some temporary supply challenges, which we are working hard to resolve, but we can assure consumers that the product remains widely available across retailers in-store and online."

The 90g bars were reportedly last available in Ocado in late June and have been out of stock in Tesco, Sainsbury's and Asda since last month, according to The Grocer.

The Money team checked each site and found the bars were not available.

At Tesco, the Darkmilk ice creams were also out of stock - but you could purchase a pack of Darkmilk Chocolate Giant Buttons.

The buttons were also available at Ocado, Sainsbury's and Asda.

TikTok Shop is raising its seller fees in the UK from 5% to 9% from 2 September.

Seller fees have not increased since the marketplace was created in 2021, but TikTok Shop says it will "continue to be among the most competitive in the market".

It is also introducing a "seller missions" programme, which will enable UK sellers to reduce their fees if they create a target number of TikTok live or shoppable videos.

There are also plans to launch a co-funded free shipping model on 4 September, which will enable sellers to offer free shipping by sharing part of the cost.

"We strive to provide the best possible experience for our sellers and buyers," said TikTok Shop UK head of operations Jan Wilk.

"This move enables us to invest further in building the marketplace of the future, including improved operations and services to help our sellers succeed.

"The sellers and brands that have the most success on TikTok Shop are those that engage with their community via live and shoppable videos, and we are confident our new initiatives to boost content creation will supercharge sales."