BANGKOK (AP) — Japan’s stock benchmark Nikkei plunged 12.4 percent on Monday, renewing a selling pressure that has rattled global markets as investors worry about the state of the U.S. economy.
The Nikkei average fell 4,451.28 points to close at 31,458.42, while the market-wide Topix index slid 12.8% as selling intensified in the afternoon.
The trading outlook on Wall Street darkened, with futures for the S&P 500 down 2.4% and the Dow Jones Industrial Average down 2.6% early Monday.
Reports that U.S. employers’ hiring slowed more than expected last month rattled financial markets, erasing the euphoria that had propelled the Nikkei average to a record high of more than 42,000 yen in recent weeks.
The Nikkei Stock Average fell 5.8% on Friday, its worst two-day drop on record. The previous record for a one-day drop was a 3,836-point (14.9%) plunge on October 20, 1987, known as “Black Monday.” Monday was another gloomy day, dropping as much as 13.4% at one point.
Tokyo stock prices have been falling since the Bank of Japan raised interest rates. Base interest rate On Wednesday, the Nikkei stock average fell 3.8% from a year ago.
The BOJ’s decision to raise rates was prompted in part by the long-term weakness of the Japanese yen, which has pushed inflation above the bank’s 2% target. Early Monday, the dollar was trading at 142.59 yen, down from Friday’s close of 146.45 yen and well below the 160-yen-plus levels of a few weeks ago.
The euro fell to $1.0914 from $1.0923.
A buying frenzy for shares in companies expected to thrive on advances in artificial intelligence sent stocks soaring to astronomical highs earlier this year. The recent sell-off hurt a market heavily weighted to computer chip makers such as Samsung Electronics and other technology stocks. On Monday, South Korea’s KOSPI plunged more than 9%, while Samsung shares fell 11.6%. The index closed down 8.8% at 2,441.55.
Taiwan’s Taiex also fell sharply, dropping 8.4%, while Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chipmaker, dropped 9.8%.
Stocks began to fall in earnest on Friday after weaker-than-expected U.S. employment data stoked fears that high interest rates aimed at taming inflation could push the U.S. economy into recession.
“The sudden spike in volatility in market yields is a sight that underscores how spooked markets have become, to say the least,” Stephen Innes of SPI Asset Management said in a commentary. “The real question is whether the typical market reaction of selling volatility or buying on market dips can trump the deep-seated anxiety caused by fears of this sudden and severe economic downturn.”
The VIX, an index that gauges investor fears about a future decline in the S&P 500, was up about 26% as of early Monday. Bitcoin, which recently surged to nearly $70,000, fell 14% to $54,155.00.
Oil prices fell, with benchmark U.S. crude down 74 cents to $72.78 a barrel, while the international standard Brent crude fell 67 cents to $76.14 a barrel.
Investors will be keeping an eye on U.S. services sector data from the Institute for Supply Management (ISM) due later on Monday, which could help gauge whether the global selling pressure is an overreaction, IG’s Yep Jun Rong said in a report.
Despite concerns around the world about the weakness of the U.S. economy and market volatility, the U.S. economy is still growing and a recession is not a certainty.
But the atmosphere was decidedly gloomy.
Hong Kong’s Hang Seng Index fell 2.2 percent to 16,579.97, while Australia’s S&P/ASX 200 slid 3.7 percent to 7,649.60.
The Shanghai Composite Index, which is somewhat insulated by capital controls from other global markets, rose modestly before retreating, down 1.5 percent to 2,862.56.
The S&P 500 fell 1.8% on Friday. Losing Streak They have now fallen at least 1% since April. The Dow Jones Industrial Average is down 1.5% and the Nasdaq Composite is down 2.4%, 10% below the record it reached last month. That level of decline is what traders call a “correction.”
The rout was just A few days later U.S. stock indexes surged to multi-month highs after Federal Reserve Chairman Jerome Powell gave the clearest indication yet that inflation has slowed enough for the central bank to start cutting interest rates as soon as September.
Now there are growing concerns that the Fed has kept its key interest rate at a 20-year high for too long, raising the risk of a recession in the world’s largest economy. Lowering interest rates would make it easier for U.S. households and businesses to borrow, boosting the economy, but the full effects could take months or a year to be felt.
“Specifically, the concern here is a scenario in which rising unemployment would curb spending, further dampening employment, incomes and economic activity, leading to a recession,” Tan Boon Heng of Mizuho Bank in Singapore said in a report.
