Japanese Stock Market index suffers worst day since 1987 as global rout intensifies

Fears of a slowdown in the US economy triggered a significant drop in stock markets across Europe and Asia on Monday.

In London, the FTSE 100 index opened 2.3% lower, while the Euronext 100 in Europe fell by 3.5%.

Asia also experienced sharp declines, with Japan’s Nikkei 225 plummeting 12.4%, a record drop by points.

This downturn followed weak jobs data from the United States on Friday, raising concerns about the health of the world’s largest economy.

The Bank of Japan’s recent interest rate hike has strengthened the yen against the US dollar, making Tokyo stocks more expensive for foreign investors.

Stock markets in India, Australia, Taiwan, South Korea, Hong Kong, and Shanghai also fell.

Speculation of a US economic slowdown has been fueled by a series of weaker-than-expected economic reports.

While major US companies like Amazon and Intel posted disappointing financial results, the US Federal Reserve, unlike other central banks such as the Bank of England, held off on cutting interest rates last week.

Official employment data showed US employers added only 114,000 jobs in July, much less than anticipated, while the unemployment rate edged up.

Shanti Kelemen, chief investment officer at M&G Wealth, commented on BBC’s Today program: “There are just a few signs that the market may be slowing down.”

“I think that scared some people on Friday, and you’re also seeing Japan react to those events since their market was closed when it happened last week.”

Kei Okamura, a portfolio manager at Neuberger Berman in Tokyo, noted, “The selloff was triggered by the sharp appreciation of the yen as global investors became cautious about Japanese corporate earnings, especially exporters like automakers.”

Over the past month, the yen has risen more than 10% against the US dollar.

A stronger yen makes Japanese goods more expensive and less attractive to foreign buyers.

Unlike other central banks, the Bank of Japan raised interest rates last week to the highest level since the global financial crisis in 2008.

Japan’s inflation rate in June was higher than expected, and the economy contracted in the first quarter due to a weaker yen and lower household spending.

In other parts of the Asia-Pacific region, Taiwan’s main share index and South Korea’s Kospi both fell by more than 8%.

India’s NSE Nifty 50 dropped 2.8%, and Australia’s S&P/ASX 200 was down about 3.6%.

The Shanghai Stock Exchange fell 1.4%, while Hong Kong’s Hang Seng dropped 2.5%.

Cryptocurrencies also took a hit, with Bitcoin falling to its lowest point since February, around $50,000.

Following the disappointing jobs data and downward revisions for May and June employment figures, New York stocks fell sharply on Friday.

The July numbers raised concerns that the long-running US jobs boom might be ending and fueled speculation about the timing and scale of the Federal Reserve’s interest rate cuts.

Despite recent data showing the US economy expanded at an annual rate of 2.8%, there are fears of a slowdown.

Ms. Kelemen of M&G Wealth said, “You can choose the evidence to tell a positive story or a negative story. I don’t think it necessarily points in one direction yet.”

Stock markets, already jittery over high borrowing costs and signs that the long rally in share prices, partly driven by optimism over artificial intelligence (AI), might be faltering, took a hit.

The Nasdaq’s decline on Friday marked a 10% drop from its recent peak—a correction occurring within weeks.

The Dow Jones Industrial Average also fell 1.5% on Friday, and the S&P 500 closed 1.8% lower.

Over the weekend, Warren Buffett’s Berkshire Hathaway revealed it had sold approximately half of its stake in Apple, the US technology giant.