Fears of a looming economic recession due to the policies of U.S. Independents Joe Biden and Kamala Harris sent Japan’s stock market into panic on Monday, causing its worst one-day sell-off in history and causing a deeper drop than “Black Monday” in October 1987.
The Nikkei’s dizzying drop of 4,451.28 points, driven by increased trading volume, was the second-largest drop in percentage terms, at 12.4%, behind Black Monday’s 3,836.48-point drop (14.9%).
There were several local factors behind Monday’s plunge, including the Bank of Japan raising interest rates from 0.1% to 0.25% last week, but market analysts said Said Nikkei Asia The main cause of the crisis was growing fears that the US could fall into a full-blown recession at the end of Joe Biden’s difficult presidency.
Naka Matsuzawa, chief strategist at Nomura Securities, said foreign investors are selling Japanese stocks due to concerns the U.S. may be heading for a recession. “The decline is not due to reasons specific to Japan,” he said. “The market is still searching for a bottom.”
He said he was taking a “wait-and-see approach until U.S. tech stocks show some resilience.” He said he doesn’t expect a global recession and that markets will be volatile until the Federal Reserve cuts interest rates, which investors are pricing in by September.
The plunge in the Nikkei average was so dizzying that “circuit breakers” were triggered several times on Monday, temporarily halting trading until the market stabilized.
All of Japan’s major banks lost double digits in value, in some cases around 20%, and as a result, the share prices of Japan’s major export companies, such as the major automakers, plummeted.
“It was the first chance for Tokyo traders to react to a report on Friday showing that U.S. employers slowed their hiring last month much more than economists expected,” the Associated Press reported. Said Regarding Monday’s Japanese market crash.
“It’s the latest data on the weaker-than-expected U.S. economy, raising concerns that the Federal Reserve has been applying too much of the brakes on the U.S. economy for too long through high interest rates in hopes of taming inflation,” the Associated Press reported.
Taiwan and South Korea stock markets also fell, dropping 8.4% and 8.8% respectively, the biggest one-day drop in the history of Taiwan’s main exchange.
of Financial Times (FT) Said International investors worry that the Federal Reserve has responded too slowly to signs of a weakening U.S. economy and may be forced to try to catch up with a series of rapid interest rate cuts.
Priya Misra, a portfolio manager at JPMorgan, predicted that the U.S. will avoid a full-blown recession, but that “markets will remain in a state of panic until the Fed shows signs of acting.”Some optimistic analysts feel that Japan’s market selloff could be a healthy correction after years of heavy borrowing at low interest rates to fund currency trading and technology development.
US markets also fell sharply on Monday, with the S&P 500 down 3.1% and the Dow Jones Industrial Average (DJIA) down 3.6%. The Associated Press quoted analysts as saying they hoped this could also be a beneficial market correction after a year of artificial highs driven by “enthusiasm for artificial intelligence technology and hopes of upcoming interest rate cuts.”
The Associated Press added:
Still, shares of companies whose profits are most closely tied to the strength of the economy fell sharply on fears of a slowdown. Smaller companies in the Russell 2000 Index fell 4.3%, further dampening a recovery for the index and other hard-hit sectors of the market.
“The market is a bit out of control. This is total panic. It’s not real, but it’s painful and it could last for several weeks,” said Andrew Brenner of National Alliance Securities. Said of The New York Times on monday.
“The market reaction reflects the deteriorating outlook for the U.S. economy. New York’s sneeze has caused Japan’s pneumonia,” said Jesper Kohl at Monex Group.
Some economists hope that Friday’s weak July jobs report – an event that most agree sparked Monday’s global market panic – may have been a “freak event caused by Hurricane Beryl”, reports the BBC. put itHurricane Beryl Inflicted After battering parts of the Caribbean and Mexico, it made landfall in Texas on July 8, causing extensive damage.
“You can pick the evidence and create a positive story, or you can pick the evidence and create a negative story. I don’t think it’s universally pointing in one direction yet,” Shanti Kelemen, chief investment officer at M&G Wealth, told the BBC.
