The prospect of the world’s largest economy falling into recession has sent shivers through investors in Asian markets
Japan’s Nikkei 225 has fallen 12.4 percent, the index drop of 4,451 representing the biggest ever single day points fall ever. This follows a 5.8 percent fall on Friday, today both the Japanese and South Korean sharemarkets went into brief trading halts to stave off panic selling. Korea’s Kospi index fell 8 percent, while Taiwan, heavily leveraged to US tech stocks saw its Taiex index down 8.4% its worst every one day fall.
Global panic ensued following last week’s economic data release from the United States Bureau of Labor Statistics. The report intensified worries that the employment market was weaker than anticipated and that the central bank had maintained interest rates too high for too long.
In Australia the market experienced a sharp decline with the S&P/ASX 200 dropping 3.7 percent on Monday, marking its steepest daily fall since May 2020, following a “bloodbath” on Friday when the index fell 2.1 percent.
In just two trading sessions, the index has lost over A$130 billion, mirroring the losses on Wall Street where the S&P 500 fell 1.8 percent on Friday, the Dow Jones decreased by 1.5 percent, and the Nasdaq declined 2.4 percent.
US employment data revealed that only 114,000 jobs were created in July, falling short of the expected 175,000, while the unemployment rate climbed to 4.3 percent, the highest since October 2021. Additionally, another US report showed that manufacturing activity, sensitive to rising interest rates, continued to shrink, with the contraction accelerating.
As investors reacted to US recession fears by selling off stocks, economists and market analysts suggested that the index was simply correcting after recent record highs. The ASX 200 had exceeded the 8100 mark as recently as Thursday.
David Bassanese, chief economist at Betashares, told Nine Newspapers, “Australia’s economy has slowed, but we are not in a recession. Naturally, we are concerned. The old saying goes that if the US economy sneezes, we catch a cold, so we are closely monitoring the situation in the US.”
On Monday, all 11 sectors of the ASX declined, with technology stocks (down 6.44 percent) suffering the most. Investor concerns about inflated tech valuations were heightened by news over the weekend that billionaire Warren Buffett had halved his stake in Apple.
Among local tech stocks, WiseTech Global saw a significant drop of 8.81 percent, the largest among large-cap stocks on the bourse, while Xero fell 5.55 percent and NEXTDC decreased by 7.39 percent.
Healthcare stocks experienced the smallest losses (down 1.95 percent), primarily due to a 2.92 percent rise in Resmed shares, which was the only large-cap stock to advance on Monday.
Financial stocks also faced severe declines, with CBA down 5.18 percent, Westpac dropping 4.59 percent, NAB falling 4.52 percent, and ANZ decreasing by 4.46 percent.
