After a sharp drop, the leading index in Japan is recovering sharply
Analysts warned on Tuesday of further significant fluctuations throughout the week. Japan's Prime Minister Fumio Kishida called for a calm head. It's important to assess the situation "calmly," he said at a press conference. The government will continue to monitor the situation and, in collaboration with the central bank, steer economic and financial policy.
On Monday, it was also down at the European stock exchanges in Frankfurt, Paris, and London. In the US, the Dow Jones lost 2.6 percent, and the tech index Nasdaq fell by 3.4 percent.
According to analysts, the turbulence is particularly due to weak US economic data, which fueled concerns about a possible recession. On Friday, the latest jobs report was published in Washington, showing that only 114,000 new jobs were created last month - far fewer than in June and well below expectations. At the same time, the US unemployment rate rose to its highest level since October 2021.
Before that, weak US industrial data had raised questions about whether the US Federal Reserve (Fed) had kept interest rates and thus also borrowing costs too high for too long. Investors are gripped by fear that the Fed has waited too long to change its policy, "especially in light of the disappointing US jobs data from Friday and a series of other weak economic indicators pointing to a looming recession," explained market analyst Fawad Razaqzada of City Index and Forex.com.
Analyst Stephen Innes also pointed out, looking at the sharp drop in Tokyo on Monday, that the mood in Asia had already deteriorated after companies like Tesla and Alphabet posted disappointing earnings, the Japanese central bank raised interest rates, and Chinese economic data weakened. Mixed together, this is the "perfect recipe" for a market crash, explained Innes.
The warnings of further fluctuations could potentially be attributed to the fear of a deeper recession. Despite Prime Minister Kishida's call for calm, the possibility of a recession in the US, as indicated by the weak jobs report and other economic indicators, has caused significant concern among investors.
