Stock markets across Europe and Asia plunged on Monday, driven by concerns that the US economy might be slowing down.
In London, the FTSE 100 index fell 2.3% at the opening, while the Euronext 100 dropped 3.5%.
This decline followed significant losses in Asia, where Japan’s Nikkei 225 plummeted by 12.4% or 4,451 points, marking the largest point drop in its history.
The sell-off came after disappointing US jobs data released on Friday, which heightened worries about the health of the world’s largest economy.
Additionally, the yen has strengthened against the US dollar since the Bank of Japan’s interest rate hike last week, making Tokyo stocks more expensive for foreign investors.
Markets in Taiwan, South Korea, India, Australia, Hong Kong, and Shanghai also experienced declines.
Weaker-than-expected economic data from the US has fueled speculation about a potential slowdown, while the US Federal Reserve decided not to cut interest rates last week, unlike other central banks such as the Bank of England. Major US companies like Amazon and Intel also reported underwhelming financial results.
US employment data showed that only 114,000 jobs were added in July, significantly below expectations, and the unemployment rate increased.
Shanti Kelemen, chief investment officer at M&G Wealth, told the BBC’s Today programme: “[There are] just some signs that potentially the market is slowing down a bit.
“I think that also spooked some people on Friday and you’re also seeing the Japanese market was already closed when that happened so you’re seeing Japan react to those things that happen last week.”
However, Kei Okamura, a Tokyo-based portfolio manager at investment firm Neuberger Berman, said that in Asia “the selloff was instigated by the sharp appreciation of the [yen] as global investors turned cautious on Japanese corporate earnings, especially that of exporters such as automakers”.
Over the past month, the Japanese yen has strengthened by more than 10% against the US dollar.
A stronger yen increases the cost of Japanese goods, making them less appealing to foreign buyers.
In contrast to other central banks, the Bank of Japan raised interest rates last week to their highest level since the global financial crisis of 2008.
Inflation in Japan surpassed expectations in June, and the economy contracted in the first quarter of the year due to a weaker yen and sluggish household spending.
In the Asia-Pacific region, Taiwan’s main share index and South Korea’s Kospi both fell by over 8%.
India’s NSE Nifty 50 index was down 2.8%, and Australia’s S&P/ASX 200 decreased by approximately 3.6%.
The Hang Seng index in Hong Kong fell by 2.5%, while the Shanghai Stock Exchange was down 1.4%.
Cryptocurrencies also suffered, with Bitcoin dropping to around $50,000, its lowest level since February.
In New York on Friday, stocks dropped sharply after disappointing jobs data revealed downward revisions for May and June employment figures.
The July data has raised concerns that the US’s prolonged jobs boom may be ending, fueling speculation about when and by how much the Federal Reserve might cut interest rates.
Despite recent data showing a 2.8% annual expansion of the US economy, there are growing fears of a slowdown.
Ms Kelemen, chief investment officer at M&G Wealth, said: “You can pick out evidence to create a positive story, you can also pick out the evidence to create a negative story.
“I don’t think it universally points to one direction yet.”
Stock markets were already jittery about high borrowing costs and concerned that the long-running rally in share prices, partly driven by optimism over artificial intelligence (AI), might be losing momentum.
On Friday, the Nasdaq experienced a decline that brought the index down roughly 10% from its recent peak—a drop referred to as a “correction,” which occurred over just a few weeks.
The Dow Jones Industrial Average fell by 1.5% on Friday, while the S&P 500 ended the day down 1.8%.
Over the weekend, it was revealed that Warren Buffett’s firm, Berkshire Hathaway, had sold about half of its stake in Apple, a major US technology giant.
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