On Thursday, global equities experienced a downturn as U.S. manufacturing data disappointed and European financial stocks faced their steepest decline since March 2023. This downturn was also reflected in falling Treasury yields due to weak economic data, a rate cut in the UK, and the anticipation of policy easing in the United States. By 1:13 p.m. ET, MSCI's global stock index had dropped by 11.15 points, or 1.37%, to 803.01. Oil futures also reversed earlier gains, with global supply appearing unaffected by escalating Middle East tensions.

The Federal Reserve maintained interest rates on Wednesday but hinted at a potential cut in September. Meanwhile, the Bank of England preempted the Fed by reducing borrowing costs by a quarter-point in a close 5-4 vote. The U.S. ISM manufacturing PMI fell to its lowest level since November, signaling a contraction in a sector that constitutes over 10% of the economy. This data suggests a potentially worse economic situation than anticipated, according to Robert Pavlik, senior portfolio manager at Dakota Wealth.

On Wall Street, the Dow Jones Industrial Average dropped by 553.80 points, or 1.36%, to 40,288.99, while the S&P 500 and Nasdaq Composite fell by 76.79 points and 388.86 points, respectively. Tech giants Apple and Amazon.com are set to report their earnings later on Thursday. Europe's STOXX 600 closed over 1% lower, with the banking sector experiencing its largest one-day drop since March 2023.

Britain's FTSE 100 diverged from the trend. Colin Asher, economist at Mizuho, noted that the Bank of England's cautious approach to rate cuts suggests a gradual reduction, making a cut in the next meeting unlikely. Emerging market stocks managed to retain gains, while Japan's Nikkei fell by 2.5% due to a strong yen affecting exporters.

The Federal Reserve's signals regarding a potential September cut kept investors focused on U.S. monetary policy. The central bank acknowledged equal risks to employment and rising prices. The yield on U.S. 10-year notes dropped to 3.986%, and the dollar index, which measures the greenback against several currencies, rose by 0.33% to 104.39. In commodity markets, U.S. crude and Brent both saw declines, while spot gold fell by 0.39% to $2,438.60 an ounce.