Europe stocks close 2.2% lower amid global downturn as volatility index spikes to Covid-era high

LONDON — European markets fell sharply at the start of the new trading week, though pared losses towards the end of the session amid a global stock sell-off.

The regional Stoxx 600 index closed 2.17% lower, pulling back from declines of more than 3% as the technology sector clawed back some ground to end 0.9% lower.

All sectors and major bourses nonetheless finished in the red, with utilities and oil and gas stocks both losing over 3%.

Strategists pointed to several causes for the downturn across Europe, Asia and the U.S. which began last week, including fears of a U.S. recession and rapid Federal Reserve Rate cuts, the recent hawkish pivot by the Bank of Japan and crash in the yen "carry trade," and an ongoing re-rating of the tech sector.

The VIX, a measure of expected market volatility, jumped more than 100% to 64.06 during Monday trade before cooling to around 35, still its highest level since 2020.

U.S. stocks saw steep losses through the morning, with the Dow Jones Industrial Average losing nearly 1,000 points, or 2.5%, as the tech-heavy Nasdaq Composite fell 2.6%.

Asia-Pacific markets had led the sell-off on Monday. Japan stocks entered a bear market, with the Nikkei 225 losing 12.4% to log its worst day since 1987.

The broad-based Topix also saw a rout, tumbling 12.23%, while heavyweight trading houses such as Mitsubishi, Mitsui and Co., Sumitomo and Marubeni all plunged more than 14%.

The yen, meanwhile, rose to its highest level against the dollar since January as U.S. Treasurys gained.

On the data front, demand for U.K. services rose in July, increasing to 52.5 from 52.1 the previous month, fresh purchasing managers' index data showed Monday. Corresponding data for Italy and Spain also pointed to sustained growth in