The financial markets are in a state of fear
The market is currently seizing on any signs of weakness. It is actively seeking out bad news," explains an Asia specialist regarding the crash on the Japanese stock market. Earlier this morning, the Nikkei experienced a "Black Monday 2.0". This also has an impact on the DAX.
The sell-off on Asian stock markets continued at the start of the new trading week. Concerns about a potential hard landing of the US economy spooked investors. In Japan, investors took further profits. The Nikkei 225 index ended down 12.4 percent at 31,458.42 points - the most significant drop in 35 years. Portfolio manager Markus Schön speaks of a "Black Monday 2.0". "Even the global COVID-19 pandemic did not have such a strong influence," he says. On "Black Monday" in October 1987, the decline was 14.9 percent.
Negative quarterly reports from US tech giants Apple, Amazon, and Intel dragged down the entire sector. Japanese heavyweights Tokyo Electron and Advantest fell by 12 and 8 percent, respectively. Notably, the numbers from US companies were partly slightly above expectations. "The market is currently seizing on any signs of weakness. It is actively seeking out bad news," explained Rob Carnell, Asia specialist at ING Bank. New recession fears due to weak industrial data worldwide and uncertainty about the situation in the Middle East following the deaths of key leaders in the Gaza Strip are also weighing on sentiment.
Because the Nikkei has lost more than 20 percent from its recent record high, market players are talking about a bear market. After a months-long rally in Japan, the Nikkei 225 reached an all-time high of around 42,400 points in mid-July. However, the yen then experienced a sharp rise in a short period, which significantly burdened the stock prices of Japanese companies, which are heavily dependent on exports. For example, the yen rose to its highest level against the US dollar since the beginning of the year on Monday.
Meanwhile, the gains of the entire stock year are melting away in Germany in just a few days. "Together with a dramatically weakening US economy, which will be handed over to Donald Trump, the stock markets worldwide are under pressure. If there is now a 'great war' between Israel and Iran, 16,000 points in the DAX will be within reach," says Schön.
A scenario with even greater implications could be looming: With their support for Ukraine and Israel and the current presidential elections, the US is currently so involved that Taiwan is out of sight. "China could take advantage of this opportunity. Then not only would the astonishing gains of NVIDIA be history - the chipmaker already lost half the value of the DAX in the previous week - but a broad-based stock market crash could be imminent."
Now, investors are eagerly awaiting the publication of the US jobs report for July. Experts are warning of caution. "The recession bogeyman has made it back onto the stage," said Jochen Stanzl, chief analyst at broker CMC Markets. "If the US jobs data today comes in too weak, the prices around the world could continue to fall dynamically, as observed yesterday."
Other investors are also following suit, selling off their positions in response to the market's negative sentiment. Despite some slightly positive numbers from US companies, the market seems determined to find bad news wherever it can.
