Tokyo led losses across Asia on Friday on a stronger yen and expectations of more rate hikes in Japan, while disappointing data sparked a plunge on Wall Street and fueled fresh fears of a US recession.
Optimism that greeted Federal Reserve chief Jerome Powell’s indication on Wednesday that borrowing costs could fall in September gave way to concern that the slowdown in the world’s number one economy may be accelerating too much.
The central bank has been seeking confirmation for months that inflation is on track and the labor market is softening, while trying to avoid a sharp plunge in business activity. She was largely confident of achieving a “soft landing”.
But news Thursday that the U.S. factory sector shrank faster than expected in July — and for the fourth straight month — raised eyebrows.
Most stocks rise on fading Fed rate hopes, but strong yen hurts Tokyo
That came as another report showed the private sector created far fewer jobs than expected in July and far fewer than in June.
The private sector added 122,000 jobs in July, below the revised June figure of 155,000 and a weaker-than-expected performance, while jobless claims also rose more than expected.
The focus is now on the release of the headline jobs report due later on Friday, which will give a clearer picture of the employment situation.
The news dealt a blow to investors, who are also facing a disappointing earnings season from Big Tech, a key driver of the global rally that has helped many markets to multiple record highs this year.
US chip titan Intel became the latest bearer of bad news, warning that it will cut more than 15 percent – about 18,000 – of its workforce as it streamlines operations. The company reported a loss of $1.6 billion in the recently ended quarter and said the third quarter would also be disappointing.
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Microsoft, Amazon, Tesla and Google parent Alphabet are also down, and while Apple beat forecasts, talk is now growing that the valuations of some of these market darlings may be too high and in need of a recall .
All three major indexes fell in New York, with the Nasdaq down more than two percent.
And Asia fared just as badly, with Tokyo standing out.
The Nikkei 225 fell more than five percent at one point on a stronger yen, which is hitting Japan’s key export sector.
The country’s tech giants were also hammered as they were led by losses in their US bonds, with chip titan Tokyo Electron shedding 10% and Sony shedding more than 6%.
Daiwa Securities said in a note: “Following the declines in New York stocks, the BoJ’s additional interest rate hike and the yen’s further appreciation, market sentiment is quickly easing.”
Hong Kong and Sydney were down more than 2%, while Seoul and Taipei were down more than 2%, with losses also in Shanghai, Wellington, Manila, Singapore and Jakarta.
The Bank of Japan is raising its key interest rate for the second time in 17 years
Wednesday’s decision by the Bank of Japan to raise interest rates for the second time in 17 years — and talk of another to come — boosted the yen to as high as 148.51 per dollar, its best level since March.
That’s just weeks after hitting nearly 126 in early July, the weakest in nearly four decades.
The pound extended losses against the dollar, a day after the Bank of England cut its key interest rate for the first time since the outbreak of the Covid pandemic in 2020.
Keys around 02:30 GMT
Tokyo – Nikkei 225: Down 4.9 percent at 36,261.85 (break)
Hong Kong – Hang Seng Index: Down 2.2 percent at 16,921.26
Shanghai Composite: DOWN 0.6 percent at 2,913.91
Dollar/yen: UP to 149.51 yen from 149.66 yen on Thursday
EUR/USD: UP at $1.0790 from $1.0750
Pound/Dollar: DOWN to $1.2718 from $1.2735
Euro/pound: UP at 84.81 pence from 84.71 pence
Yen rises ahead of Bank of Japan decision as rate hike talks swirl
West Texas Intermediate: UP 0.7 percent to $76.84 a barrel
Brent North Sea crude: DOWN 0.6% to $80.03 a barrel
New York – Dow: DOWN 1.2 percent at 40,347.97 (close)
London – FTSE 100: Down 1.0 percent at 8,283.36 (close)
Source: AFP