Tokyo sent Asian shares plunging on Monday, while the yen hit a six-month high after weak US jobs data fueled fears of a recession in the world’s top economy and boosted bets on several rate cuts by the Federal Reserve Reserve.
The sell-off followed another heavy day of losses on Wall Street, where tech heavyweights such as Amazon and Microsoft took the brunt on concerns that an AI-fueled rally this year may have been overdone.
A much-anticipated report on Friday showed the US economy added just 114,000 jobs last month, well below June and far fewer than expected, while the unemployment rate rose to its highest level since October 2021.
The news came a day after lackluster factory data fueled concerns that Fed officials may have kept borrowing costs too high at more than two-decade highs.
US extends hiring curbs while unemployment is higher than in 2021
This led to speculation that the economy could hit a hard landing and head into recession.
Markets are “still reeling from last Friday’s seismic shifts in the global financial landscape,” Stephen Innes said in his Dark Side Of The Boom newsletter.
“The trigger? A US jobs report that missed the mark so badly didn’t just drop jaws — it sent stock and bond yields tumbling while sending expectations of volatility and rate cuts.”
He pointed out that “mood was already sour in Asia” after a disappointing bath of earnings from tech titans such as Tesla and Alphabet, as well as a rate hike by the Bank of Japan and weaker Chinese economic data.
“Mix them together and you have the perfect recipe for a market crash.”
Losses in New York followed in Asia, with Tokyo’s Nikkei down more than 7 percent at one point, while Taipei and Seoul also sold off heavily.
Tokyo tanks as Asian markets watch Wall St under recession fears
The sell-off also spurred officials in Tokyo after the Nikkei fell 5.8 percent on Friday – its biggest loss since 2021 during the pandemic. The market is down nearly 20 percent from a record high it hit just a month ago.
More Fed cuts on the cards?
Japan’s top government spokesman, Yoshimasa Hayashi, said it would “continue to remain vigilant and monitor market developments with keen interest.”
“We know there are mixed reviews about the plunge in stocks this time and about the state of the Japanese economy, but the government will continue its efforts to fully break free from deflation and transition to a growth-oriented economy.”
The biggest losers were technology companies, with chip titan TSMC shedding more than six percent in Taipei, while Seoul-listed Samsung fell more than 5 percent and SK hynix about 4 percent.
Hong Kong and Shanghai fell, with traders rejecting a series of directives issued by China aimed at boosting household consumption in the world’s second-largest economy.
Most stocks rise on fading Fed rate hopes, but strong yen hurts Tokyo
Heavy losses were also reported in Sydney, Singapore, Manila, Jakarta and Wellington.
The yen broke 145 yen per dollar for the first time since January as the jobs report raised expectations that the Fed will cut interest rates.
The U.S. central bank had signaled after its last meeting on Wednesday that slowing inflation and an easing labor market meant it could cut next month, with traders expecting two or three 25-basis-point cuts before January.
There is now speculation that he will cut interest rates by a full percentage point in that time.
Taylor Nugent at National Australia Bank said: “The Fed doesn’t meet again until September 18. There is still one payroll report and two (consumer price indices) before then.
“It’s hard to imagine they could stop the Fed from cutting in September, with interest in whether they support a 50 basis point move and how fast the cuts will go.”
The yen — which just last month hit a near four-decade low near 162 to the dollar — was also boosted by the Bank of Japan’s decision last week to raise interest rates for just the second time in 17 years, and the proposal would you could be on the road.
Will the Bank of England finally cut interest rates?
Keys around 02:30 GMT
Tokyo – Nikkei 225: Down 4.6 percent at 34,247.56 (break)
Hong Kong – Hang Seng Index: Down 1.1 percent to 16,753.94
Shanghai Composite: DOWN 0.5 percent at 2,891.93
Dollar/yen: DOWN at 145.15 yen from 146.52 yen on Friday
EUR/USD: UP at $1.0916 from $1.0912
GBP/USD: DOWN to $1.2785 from $1.2802
Euro/pound: UP to 85.50 pence from 85.22 pence
West Texas Intermediate: UP 0.1 percent to $73.59 a barrel
Brent North Sea crude: FLAT at $76.81 a barrel
New York – Dow: DOWN 1.5 percent at 39,737.26 (close)
London – FTSE 100: Down 1.3% to 8,174.71 (close)
Source: AFP