Fears of a recession in the United States, tensions in the Middle East and the rise of the yen largely explain the falls in indices observed this Monday on the stock exchanges of Japan, Taiwan and South Korea.
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Asian stock markets were in free fall on Monday, with indices in Tokyo, Seoul and Taiwan experiencing steep falls amid fears of a recession in the United States and a soaring yen, notes Agence France Presse.
The leading Nikkei index in the Japanese capital, which had already fallen 5.8% on Friday, sank 12.28% to 31,500.03 points at around 0535 GMT, on course for the biggest drop in points in its history. The broader Topix index collapsed 12.38% to 2,223.55 points. Taiwan fell 8%, as did Seoul.
Chinese stock markets fell more moderately, with Hong Kong’s Hang Seng index down 1.8%, the Shanghai Composite Index down 1.1% and the Shenzhen Composite Index down 1.5%.
” The trigger? A U.S. jobs report that missed its target so badly that it sent not only jaws dropping, but stocks and bond yields as well. “, on Wall Street, according to Stephen Innes of SPI Asset Management.
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Fears of an escalation of tensions in the Middle East are also adding to market volatility, following threats from Iran and its allies against Israel, which the Palestinian Islamist movement Hamas and Lebanese Hezbollah blame for the death on Wednesday of Hamas leader Ismail Haniyeh.
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Even before the particularly worrying employment figures published on Friday in the United States, the Tokyo Stock Exchange had had a black day, with the Nikkei experiencing its steepest drop in points since 1987 and the second largest in its history.
Several factors played a role, including a worrying US report on manufacturing activity in July and a fall in technology stocks amid doubts about the sector’s growth prospects. However, the immediate trigger for this risk aversion seems to be the unexpected rise in interest rates. ” announced Wednesday by the Bank of Japan, according to Dilin Wu, strategist at Pepperstone, ” This decision hit the Japanese stock market like a bolt from the blue..
This increase in interest rates has precipitated the rise of the yen, also supported by interventions by the Japanese central bank on the foreign exchange market. However, this exchange rate movement is harmful for Japanese exporting companies that had benefited from the fall of the Japanese currency.
Japanese banks have been particularly hard hit, with Nintendo shares plunging 16 percent after the Japanese video game giant saw its first-quarter net profit fall and maintained extremely conservative guidance on Friday as its next console is not expected for several months.