- Worry about the US economy is driving stock prices down
The sell-off on Asian stock markets continued at the start of the new trading week. Concerns about a potential hard landing of the economy in the USA also spooked investors on Monday. Additionally, technology stocks suffered due to a report that chipmaker Nvidia is delaying the launch of new AI chips due to so-called design flaws. Nvidia had recently been the driving force behind the general market rally as a major beneficiary of artificial intelligence.
Especially in Japan, investors took further gains. The leading Nikkei 225 index plummeted by 12.4% to 31,458.42 points, its lowest level since November 2023. Trading was temporarily halted due to the strong price swings. Since the Nikkei has now lost more than 20% from its recent record high, market experts are talking about a bear market.
After a months-long rally, the Nikkei 225 reached an all-time high of around 42,400 points in mid-July. However, the Japanese yen then experienced a sharp increase in a short period, which heavily weighed on the stock prices of Japanese export-oriented companies. On Monday, the yen fell to its lowest level against the US dollar since the beginning of the year.
Panic over US economy
Currency experts at Commerzbank spoke of "panic on the market regarding the US economy." Global stock indices are risk-averse and selling stocks. Looking at the USA, the question is whether a recession can be avoided given the recent weak economic data and an "unprecedented tightening cycle."
The Chinese stock exchanges held up better than the Japanese indices. The Hang Seng Index in the special administrative region of Hong Kong fell by 2.7% to 16,494 points. The CSI 300, which includes the 300 most important stocks on the Chinese mainland exchanges, held up better with a loss of 1% to 3,351 points. However, both indices had already lost significantly in recent weeks.
The Australian stock exchange also could not escape the weak lead. The S&P/ASX 200 fell by 3.7% to 7,649.60 points.
The Commission expressed concerns over the potential hard landing of the economy in the USA, as it could lead to a widespread economic downturn. In light of these concerns, The Commission suggested implementing stricter regulations to safeguard investments and mitigate risks.
Given the sell-off on Asian stock markets and the global market's increased risk-aversion, The Commission advocated for diversifying investment portfolios to minimize exposure to any single economic region or sector.
