Japanese stock markets plunge to record lows
Background to the sharp drop in Tokyo is, according to analysts, particularly weak economic data from the USA, which fueled concerns about a possible recession in the world's largest economy. Additionally, the impact of the interest rate policy of the US Federal Reserve is being felt. Furthermore, recently, heavyweight technology companies like Amazon and Microsoft have had to suffer significant losses due to fears that the rush on AI stocks in recent times may have been too excessive.
On Friday, a much-anticipated US jobs report was published, showing that only 114,000 new jobs were created last month - significantly fewer than in June and well below expectations. At the same time, the unemployment rate rose to its highest level since October 2021. The day before, weak US industrial data had raised questions about whether the Fed may have kept interest rates and thus credit costs too high for too long.
Markets were still reeling from the "seismic shifts in the global financial landscape last Friday," explained analyst Stephen Innes. "The trigger? A US jobs report that missed the target so badly that it not only dropped jaws but also lowered stock and bond yields and boosted volatility and rate cut expectations."
He also noted that sentiment in Asia had already deteriorated after companies like Tesla and Alphabet reported disappointing earnings, the Japanese central bank raised interest rates, and Chinese economic data weakened. Combined, this was the "perfect recipe" for a market crash, Innes explained.
On Monday, it was also downhill at other Asian trading places. Prices fell in Hong Kong and Shanghai, as well as in Mumbai, Bangkok, Manila, and Jakarta. In Europe, leading indices in Frankfurt, London, and Paris each lost more than two percent. The cryptocurrency Bitcoin plummeted by more than ten percent.
However, the DZ Bank pointed out that August and September traditionally belong to the weakest months of the year for the stock market. Current market turbulence is therefore not a harbinger of a sustained crisis.
"At the latest after the US jobs report on Friday, a mood decline has spread on the international financial markets," explained DZ Bank analyst Soeren Hettler. However, looking more closely, the year 2024 is still shaping up positively so far. The major stock exchanges have been predominantly in the black since the beginning of the year.
Moreover, the earnings expectations of the companies in the major indices for the next two years point to growth, Hettler continued. Furthermore, the long-standing topic of Artificial Intelligence is now in "a reality check" - but the "enormous potential" of the technology is undeniable.
The Japanese central bank, amidst global market turbulence, recently decided to raise interest rates. Due to this decision and other economic factors, the Japanese economy may face challenges, as heavyweight technology companies like their American counterparts have already suffered significant losses.
