Amid concerns about a potential economic recession due to weak job data in the United States, global stock markets faced heavy selling pressure on Monday. Following the opening of Asian stock markets on the 5th, the Japanese stock market continued its downward trend from the previous week, with the Nikkei index plummeting over 7% in the morning session, triggering a circuit breaker mechanism and closing with a more than 12% decline.
In early trading on Monday, the Nikkei 225 index plunged by as much as 7.1%, further dropping to 7.4% by the afternoon session. Market data showed that the index had declined by 22% since early July. Both the TOPIX index and the Nikkei 225 index experienced three consecutive days of significant declines, pushing them into bear market territory, defined as a 20% drop from recent highs.
The Japanese stock market closed on Monday with a staggering drop of over 12%. The Nikkei 225 index tumbled 4451.28 points or 12.40%, ending at 31458.42 points, marking its largest decline in history. The TOPIX index also plunged by 310.45 points or 12.23%, closing at 2227.15 points.
European stock markets opened lower, with Germany’s DAX index down by 2.5% to 17,222.69 points. The Paris CAC 40 index declined by 2.4% to 7080.96 points, while London’s FTSE 100 index dropped by 2% to 8011.52 points.
In early trading on Wall Street, Dow Jones Industrial Average futures fell by around 600 points, a 1.5% decrease. S&P 500 index futures and Nasdaq 100 index futures also saw declines of 2.8% and 4.9%, respectively.
According to Nikkei News, on Monday, the Nikkei index futures on the Osaka Exchange triggered a circuit breaker mechanism around 1:30 pm local time due to an 8% decline, temporarily halting trading. After resuming trading and facing continued selling pressure, another circuit breaker was triggered around 2:30 pm.
Last Friday, the Nikkei index closed with a 5.8% decrease, marking the largest single-day drop since March 2020, attributed to concerns over the Bank of Japan’s possible interest rate hike and the strengthening yen affecting Japanese companies.
It is widely believed that the Bank of Japan’s interest rate hike in July led to a significant rebound of the yen, posing challenges for Japanese exporters. Since the rate hike on July 31st, both the TOPIX index and the Nikkei 225 index have recorded substantial declines for three consecutive trading days from August 1-5.
Asian stock markets also saw declines on Monday. South Korea’s KOSPI index fell by over 8%, marking the largest single-day drop since October 24, 2008, and triggering a circuit breaker for the first time in four years, with trading in Seoul suspended for 20 minutes starting from 2:14 pm local time. The Kosdaq index for small-cap stocks dropped by 11.71%.
Taiwan’s stock market opened lower on Monday and continued to slide due to weakness in tech and real estate stocks, with the weighted index plummeting by 1807.21 points, a decline of 8.35%.
Australia’s S&P/ASX 200 index dropped by 3.7% to 7649.6 points. Hong Kong’s Hang Seng index fell by 1.61%, while mainland China’s CSI 300 index declined by 0.48%, with the smallest drop in Asia.
Last Friday, the US Department of Labor released disappointing job reports for July, sparking concerns about an economic slowdown. Investors worry that the weak job data signals a rapid softening of the economy.
Despite the positive news of potential interest rate cuts by the Federal Reserve being overshadowed by concerns about economic recession, the US stock market saw significant declines last Friday. The Dow fell by 1.5%, the S&P 500 dropped by 1.8%, and the Nasdaq Composite Index declined by 2.4%. The Nasdaq index closed in correction territory, with a drop of over 10% compared to its recent high on July 10.
The fear index, known as the Volatility Index (VIX), seen as an important indicator of market volatility and investor sentiment, also rose to around 26% on Monday.
However, CNBC quoted Jeffrey Roach, Chief Economist at LPL Financial, stating, “The latest labor market conditions align with an economic slowdown but not necessarily a recession. However, early warning signs indicate further softening in the economy.”