After the historic fall of Japan’s leading index Nikkei on Monday and the tremor in the global market, Asian stock markets are slowly recovering. The Nikkei rose 10 percent in early trading.
The day before, it had fallen by more than twelve percent and, with a loss of 4,451.28 points, it experienced the largest points drop within a trading day in its history. The European stock exchanges in Frankfurt am Main, Paris and London also went downhill on Monday. In the US, the Dow Jones lost 2.6 percent and the Nasdaq technology index fell by 3.4 percent.
Background of turbulence
Analysts say the backdrop to the turbulence is mainly weak economic data from the US, which has fueled concerns about a possible recession. A long-awaited jobs report was released in Washington on Friday, showing that only 114,000 new jobs were created last month – significantly fewer than in June and much fewer than expected. At the same time, the US unemployment rate rose to its highest level since October 2021.
Earlier, weak U.S. manufacturing data had raised questions about whether the U.S. Federal Reserve may have held its key interest rate, and thus borrowing costs, at a 23-year high for too long. Investors are gripped by fears that the Fed waited too long “to change its policy, especially given Friday’s disappointing U.S. jobs data and a number of other weak economic indicators that point to an impending recession,” market analyst Fawad Forex.com said.
Investors’ nerves are under serious strain
A capital market strategist at Robomarkets sees investors’ nerves seriously strained. The Japanese benchmark index Nikkei-225, which has fallen twelve percent, is thought-provoking. The conflict in the Middle East is escalating. “An attack by Iran on Israel (…) seems only a matter of time.” At the same time, the unemployment rate in the US has risen to its highest level in three years. “The Fed has held on to high interest rates for too long and the economy is in danger of falling into recession.”
In light of the sharp drop in prices in Tokyo on Monday, analyst Stephen Innes also pointed out that sentiment in Asia had already deteriorated after companies like Tesla and Alphabet posted disappointing earnings, the Bank of Japan raised interest rates and Chinese economic data weakened. It all adds up to a “perfect recipe” for a market meltdown, Innes explained.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
