Japan’s benchmark stock index fell 12.4% on Monday, exacerbating a global market rout triggered by investor concerns that the U.S. economy could head into recession.
Friday’s report that U.S. employers slowed hiring by more than expected last month spooked financial markets, pushing the Nikkei stock average to an all-time high of more than 42,000 yen in recent weeks. The feeling of elation was overcome.
The turmoil comes just days after U.S. stock indexes soared to multi-month highs after Federal Reserve Chairman Jerome Powell laid the groundwork for a potential interest rate cut in September.
But Friday’s jobs report raised concerns that the Fed had kept its key interest rate at a 20-year high for too long, raising the risk that the world’s largest economy could slide into recession. There is. Lower interest rates will make borrowing cheaper for U.S. households and businesses, but it may take some time for the effects to boost the economy.
Tan Boon Heng of Mizuho Bank in Singapore said: “In particular, the scenario of concern here is one in which a rise in the unemployment rate suppresses spending, further restricting employment, incomes and economic activity, leading to an economic recession.” ,” the report said.
US financial markets fell sharply on Friday following lackluster employment data. On that day, the S&P 500 fell 1.8%, and the tech-heavy Nasdaq Composite fell 2.4%, falling into “correction” territory where stock prices fall at least 10% from their all-time highs. The blue-chip Dow Jones Industrial Average fell 1.5%.
The gloomy mood on Wall Street appeared to continue Monday, with Nasdaq futures down about 800 points, or 4.2%, as of 7:09 a.m. ET, and S&P 500 futures and Dow futures down 2.8% and 1.9%, respectively. did.
“The historic overnight plunge of more than 12% in the Nikkei Stock Average has triggered a market carnage, with U.S. markets trading in the red across the board,” Wedbush Securities analyst Dan Ives said in a note. “Investors around the world are feeling the pain.”
A pedestrian in Tokyo stares at a display board showing the closing price figures after the Tokyo Stock Exchange suffered record losses on August 5, 2024. Richard A. Brooks/AFP via Getty Images
IG’s Yep Jun Long said in a note that investors are keeping an eye on data on the U.S. services sector from the Institute for Supply Management to be released later on Monday, which suggests whether the decline in stocks around the world is an overreaction. He said it could be helpful in determining whether
Although concerns about the weak US economy and volatile markets are spreading around the world, the US economy is still growing and a recession is not a certainty.
Until Friday, there had been relatively few major market movements over the past year.
A bonanza in artificial intelligence technology helped lift Big Tech stocks higher, but other areas of the market held firm as expectations for future interest rate cuts rose. But professional investors warn that more volatile times may be ahead, given uncertainty about how quickly the Fed will cut interest rates and other big issues.
AI pullback
On Monday, the Nikkei Stock Average fell 4,451.28 points to close at 31,458.42. It fell 5.8% on Friday, its worst two-day decline on record. Stock prices in South Korea and Taiwan also fell sharply, and all three Asian markets were hurt as investors pulled out of companies focused on artificial intelligence over concerns that the sector was overvalued. Ta.
European markets also started lower on Monday, with Germany’s DAX down 2.3% to 17,267.00. Paris’ CAC40 index fell 1.9% to 7,114.33, while London’s FTSE 100 index fell 2.1% to 8,004.19.
Stocks in Tokyo have fallen since the Bank of Japan raised its benchmark interest rate on Wednesday. The Nikkei Stock Average is currently down 3.8% from a year ago.
The Japanese yen also fell sharply, trading at 142.37 yen from 146.45 yen late Friday, well below the level above 160 yen a few weeks ago.
The euro rose to $1.0952 from $1.0923.
“To say the least, the spike in volatility is a sight that highlights just how volatile markets have become,” Stephen Innes of SPI Asset Management said in a comment. “The real question now looms: Can the typical market reflexive volatility selling and bullish buying overcome the deep-seated fears brought about by this fear of a sudden and sharp recession? Do you?”
