BANGKOK – Japan’s benchmark Nikkei 225 stock index plunged 12.4% on Monday in the latest wave of selling that is roiling world markets as investors worry about the state of the U.S. economy.
The Nikkei closed down 4,451.28 points, at 31,458.42. The market’s broader TOPIX index fell 12.8% as afternoon sales recovered.
A report showing that hiring by U.S. employers slowed last month much more than expected convulsed financial markets, overcoming the euphoria that had driven the Nikkei to all-time highs of more than 42,000 in recent weeks.
The Nikkei 225 fell 5.8% on Friday, making this the worst two-day drop ever. Its worst single-day loss was a drop of 3,836 points, or 14.9%, on a day dubbed “Black Monday” in October 1987. At one point, the benchmark index fell as much as 13.4% in Monday.
Stock prices have fallen in Tokyo since the Bank of Japan raised its reference interest rate on Wednesday. The Nikkei is now down 3.8% year-on-year.
One factor that led the Bank of Japan to raise rates was the prolonged weakness of the Japanese yen, which pushed inflation above the central bank’s 2% inflation target. On Monday morning, the dollar was trading at 142.39 yen, down from 146.45 on Friday and sharply below the 160-plus yen level a few weeks ago.
The euro fell to $1.0896 from $1.0923.
Stocks reached stratospheric levels earlier this year due to frenzied buying of shares in companies expected to prosper thanks to advances in artificial intelligence. The latest setback has hit markets heavily influenced by computer chipmakers like Samsung Electronics and other technology stocks: On Monday, South Korea’s Kospi plunged 9.3%, while Samsung shares sank 11.6% .
Taiwan’s Taiex also collapsed, losing 8.4%, while Taiwan Semiconductor Manufacturing Co., the world’s biggest chipmaker, fell 9.8%.
Stocks fell across the world on Friday after weaker-than-expected jobs data fueled concerns that the U.S. economy could be cracking under the weight of high interest rates aimed at controlling inflation. Early Monday, the future of S&OP 500 fell 1.5% and the Dow Jones Industrial Average fell 0.7%.
“To say the least, the increased volatility of volatility is a spectacle that underlines how nervous markets have become,” said Stephen Innes of SPI Asset Management in a commentary. “The real question now arises: Will the typical market reflex of selling volatility or buying market declines prevail over the deep anxiety provoked by this sudden and sharp recession scare?”
The VIX, an index that measures how worried investors are about upcoming declines in the S&P500 fell about 26% on Monday morning. Bitcoin, which recently rose to nearly $70,000, fell 14% to $54,155.00.
Oil prices have changed little. Benchmark U.S. crude oil gained 9 cents to $73.61 per barrel, while Brent crude was steady at $76.81 per barrel.
Investors will be watching data on the U.S. services sector from the U.S. Institute of Supply Management due out on Monday that could help determine whether the worldwide sell-off is an overreaction. said IG’s Yeap Jun Rong in a report.
Concerns about the weakness of the US economy and market volatility have resonated around the world, despite the fact that the US economy is still growing and a recession is far from a certainty.
Elsewhere in Asia, Hong Kong’s Hang Seng index lost 2.5% to 16,519.78 and the S&OP/ASX 200 in Australia fell 3.8% to 7,637.40.
The Shanghai Composite index, which is somewhat isolated by capital controls from other world markets, rose but then gave way, losing 1.2% to 2,870.34.
YOU&The P500’s 1.8% decline on Friday was the first consecutive loss of at least 1% since April. The Dow Jones Industrial Average fell 1.5% and the Nasdaq Composite fell 2.4%.
Friday’s losses dragged the Nasdaq index 10% below the record set last month. This falling level is what traders call a “correction.”
The defeat just started a few days later U.S. stock indexes jumped to their best day in months after Federal Reserve Chairman Jerome Powell gave the clearest indication yet that inflation has slowed enough for rate cuts to begin in September.
Now concerns are growing that the Fed may have kept its key interest rate at the highest level in two decades for too long, increasing the risks of a recession in the world’s largest economy. A rate cut would make it easier for U.S. families and businesses to borrow and boost the economy, but it could take months to a year for the full effects to be felt.
“Specifically, the scenario of higher unemployment, restricting spending and further restricting hiring, income and economic activity, leading to a recession, is the feared scenario here,” said Tan Boon Heng of Mizuho Bank in Singapore. in a report.
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