Asian stocks tank after US data fans recession fears

Asian stocks tank after US data fans recession fears

The yen has surged against the dollar to hit its strongest level since January
The yen has surged against the dollar to hit its strongest level since January. Photo: Richard A. Brooks / AFP
Source: AFP

Tokyo led a plunge across Asian equities Monday, while the yen hit a six-month high after weak US jobs data fanned fears of a recession in the world's top economy and boosted bets on several Federal Reserve interest rate cuts.

The sell-off followed another hefty day of losses on Wall Street, where heavyweight tech firms including Amazon and Microsoft took the brunt owing to worries an AI-fuelled rally this year may have been overdone.

A much-anticipated report Friday showed the US economy added just 114,000 jobs last month, well down from June and far fewer than expected, while the jobless rate rose to the highest level since October 2021.

The news came a day after lacklustre factory data that stoked concerns that Fed officials may have held borrowing costs at more than two-decade highs too long.

Read also

US extends hiring cooldown while unemployment highest since 2021

That has led to speculation the economy could be in for a hard landing and tip into recession.

Markets are "still reeling from last Friday's seismic shifts in the global financial landscape", said Stephen Innes in his Dark Side Of The Boom newsletter.

"The trigger? A US employment report that missed the mark so badly didn't just drop jaws -- it dropped stocks and bond yields while sending volatility and rate cut expectations through the roof."

He pointed out that "the mood was already souring in Asia" following 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 more weak Chinese economic data.

"Mix these, and you have the perfect market meltdown recipe."

The losses in New York were followed in Asia, with Tokyo's Nikkei tanking more than seven percent at one point, while Taipei and Seoul were also heavily sold.

Read also

Tokyo tanks as Asian markets track Wall St down on recession fears

The selling was also making officials in Tokyo sit up after the Nikkei shed 5.8 percent on Friday -- its biggest loss since 2021 during the pandemic. The market is down almost 20 percent from its record high touched just a month ago.

More Fed cuts on cards?

Japan's top government spokesman Yoshimasa Hayashi said it "will continue to stay on its toes and monitor market developments with keen interest".

"We're aware there are various evaluations regarding the stocks plunge this time around, and about the status of the Japanese economy, but the government will continue its efforts to completely break free of deflation and to transition to a growth-driven economy."

The biggest losers were tech firms, with chip titan TSMC losing more than six percent in Taipei, while Seoul-listed Samsung was off more than five percent and SK hynix down around four percent.

Hong Kong and Shanghai dropped, with traders brushing off a set of directives released by China aimed at boosting household consumption in the world's number two economy.

Read also

Most stocks rise on Fed rate cut hope but strong yen batters Tokyo

There were also big losses in Sydney, Singapore, Manila, Jakarta and Wellington.

The yen broke through 145 per dollar for the first time since January as the jobs report ramped up expectations the Fed will slash rates.

The US central bank had signalled after its latest meeting Wednesday that slowing inflation and a softening labour market meant it could cut next month, with traders predicting two or three 25-basis-point reductions before January.

Now there is speculation it will lower rates 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 one more payrolls report and two (consumer price indexes) before then.

"It's hard to imagine they could stop the Fed cutting in September, with interest instead on whether they support a 50-basis-point move and how rapid cuts will be going forward."

The yen -- which just last month hit a nearly four-decade low close to 162 to the dollar -- was also boosted by the Bank of Japan's decision last week to hike interest rates for just the second time in 17 years and suggestion more could be on the way.

Read also

Bank of England to finally cut interest rate?

Key figures around 0230 GMT

Tokyo - Nikkei 225: DOWN 4.6 percent at 34,247.56 (break)

Hong Kong - Hang Seng Index: DOWN 1.1 percent at 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

Euro/dollar: UP at $1.0916 from $1.0912

Pound/dollar: DOWN at $1.2785 from $1.2802

Euro/pound: UP at 85.50 pence from 85.22 pence

West Texas Intermediate: UP 0.1 percent at $73.59 per barrel

Brent North Sea Crude: FLAT at $76.81 per barrel

New York - Dow: DOWN 1.5 percent at 39,737.26 (close)

London - FTSE 100: DOWN 1.3 percent at 8,174.71 (close)

New feature: Сheck out news that is picked for YOU ➡️ click on “Recommended for you” and enjoy!

Source: AFP

Authors:
AFP avatar

AFP AFP text, photo, graphic, audio or video material shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP news material may not be stored in whole or in part in a computer or otherwise except for personal and non-commercial use. AFP will not be held liable for any delays, inaccuracies, errors or omissions in any AFP news material or in transmission or delivery of all or any part thereof or for any damages whatsoever. As a newswire service, AFP does not obtain releases from subjects, individuals, groups or entities contained in its photographs, videos, graphics or quoted in its texts. Further, no clearance is obtained from the owners of any trademarks or copyrighted materials whose marks and materials are included in AFP material. Therefore you will be solely responsible for obtaining any and all necessary releases from whatever individuals and/or entities necessary for any uses of AFP material.