Japan’s benchmark Nikkei 225 stock index fell 12.4% on Monday, in the latest wave of selling to rock global markets as investors fret over the state of the U.S. economy.
The Nikkei closed down 4,451.28 points at 31,458.42. The general TOPIX index fell 12.8% as selling resumed in the afternoon.
European markets fell in early trading on Monday, following heavy selling in Asia.
In Frankfurt, shares fell by more than 3%, in Paris by 2.6% and in London by 2.3%, Agence France-Presse reported. In Milan, the stock market fell by 4% and in Madrid by 2.8%.
The outlook for trading on Wall Street is clouded by the 2.4% drop in the S&P 500 and the 2.6% drop in the Dow Jones Industrial Average on Monday morning.
A report released Friday shows that U.S. employers are hiring slowed down last month much more than expected shook financial markets, ending the euphoria that had carried the Nikkei to historic highs of more than 42,000 points in recent weeks.
Stocks fell around the world after jobs data stoked fears that the U.S. economy could buckle under the weight of high interest rates aimed at taming inflation.
“To put it mildly, the spike in volatility is a spectacle that underscores just how nervous markets have become,” Stephen Innes of SPI Asset Management said in a commentary. “The real question now is: can the market’s typical reflex of selling volatility or buying the dip outweigh the deep-seated anxiety caused by this sudden and brutal fear of a recession?”
RICHARD A. BROOKS / AFP via Getty Images
Are global markets overreacting?
Concerns about the US economy are spreading around the world, even though the US economy is still growing and a recession is far from a certainty.
The S&P 500 fell 1.8% on Friday, its first consecutive decline of at least 1% since April. The Dow Jones Industrial Average fell 1.5% and the Nasdaq Composite lost 2.4%.
Friday’s losses pushed the Nasdaq Composite Index 10% below its record set last month. That level of decline is what traders call a “correction.”
The rout began just days after U.S. stock indexes hit their best level 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 a 20-year high for too long, raising the risk of a recession in the world’s largest economy. Lowering rates would make it easier for American households and businesses to borrow and boost the economy, but the full effects could take months or even a year.
“Specifically, the scenario of higher unemployment limiting spending and further limiting hiring, income and economic activity leading to a recession is the feared scenario here,” Tan Boon Heng of Mizuho Bank in Singapore said in a report.
Investors will be watching for U.S. services sector data from the American Institute of Supply Management, due later Monday, which could help determine whether the global selloff is an overreaction, IG’s Yeap Jun Rong said in a report.
Japanese stocks, an indicator for global markets on Monday?
The Nikkei 225 index fell 5.8% on Friday, its worst two-day drop. Its worst single-day plunge was a 3,836-point drop, or 14.9%, on a day dubbed “Black Monday” in October 1987. At one point, the benchmark index fell as much as 13.4% on Monday.
Stock prices have fallen in Tokyo since the Bank of Japan raised its key interest rate on Wednesday. The Nikkei index is now down 3.8% from a year ago.
One factor that prompted the BoJ to raise interest rates was the prolonged weakness of the yen, which has pushed inflation above the central bank’s 2% target. The dollar was trading at 142.39 yen on Monday morning, down from 146.45 late Friday and well below its level of more than 160 yen a few weeks ago.
The euro fell to $1.0896 from $1.0923.
Stocks hit stratospheric highs earlier this year, fueled by a buying frenzy in shares of companies that are expected to thrive on advances in artificial intelligence. The latest setback has hit markets heavily weighted toward computer chipmakers like Samsung Electronics and other technology stocks: On Monday, South Korea’s Kospi fell 9.3% while Samsung shares fell 11.6%.
Taiwan’s Taiex also slumped, losing 8.4% while Taiwan Semiconductor Manufacturing Co., the world’s largest chipmaker, fell 9.8%.
Oil prices were little changed. Benchmark U.S. crude gained 9 cents to $73.61 a barrel while Brent was flat at $76.81 a barrel.
Elsewhere in Asia, Hong Kong’s Hang Seng index lost 2.5% to 16,519.78 and Australia’s S&P/ASX 200 fell 3.8% to 7,637.40.
The Shanghai Composite Index, somewhat isolated from other global markets by capital controls, edged higher before falling 1.2 percent to 2,870.34.
