Global markets tumble amid recession fears; banks and tech hit hard
Shafaq News/ On Monday, stock indices dropped across Asia, Europe, Dubai, and Egypt, while the dollar and euro fell 2% against the yen amid growing US recession fears.
European stock indices dropped at the opening, with Paris down 2.42%, London 1.95%, Frankfurt 2.49%, Amsterdam 3.05%, Milan 3.31%, Zurich 2.97%, and Madrid 2.79%."
The London Stock Exchange Group reported on Monday that Dubai's main index dropped 4.2%, while Reuters noted “a 4% decline in the EGX 30 Index.”
Stephen Innes, an analyst at SPI Asset Management, noted that “the decline was due to Friday's US jobs report and was reflected in lower stock and bond yields on Wall Street.”
The US unemployment rate rose to 4.3% in July, exceeding the expected 4.1%. This is the highest rate since October 2021.
As a result, bond yields dropped sharply, suggesting the Federal Reserve might cut interest rates more than anticipated.
Innes noted that “a 50-basis-point rate cut by the Fed in September, rather than the expected 25 points, would signal an acknowledgment of the delay in easing monetary policy.”
Deutsche Bank analysts noted that current market expectations for Federal Reserve rate cuts over the next 12 months are typically seen only during recessions.
In the bond market, US interest rates, which move inversely to bond prices, fell to 3.76% at 07:25 GMT from 3.79% on Friday for ten-year bonds. This decline reflects investors' shift towards safer assets compared to riskier stocks.
On Monday, Asian stock markets saw significant declines, particularly in Tokyo. The Nikkei dropped 12.4% (4,400 points), marking its worst decline since October 1987. The broader Topix index also fell by 12.23%.
Taiwan and Seoul stock exchanges dropped over 8% and 9%, respectively.
Chinese stock markets experienced moderate declines, with the Hong Kong Hang Seng Index down 2.13%, the Shanghai Composite Index falling 1.54%, and the Shenzhen Composite Index dropping 1.85%.
Dilin Wu, a strategist at Pepperstone, attributed the risk aversion to last Wednesday's unexpected interest rate hike announced by the Bank of Japan.
After years of negative interest rates, monetary tightening and a slowdown in US economic activity have sharply boosted the yen, further supported by Bank of Japan interventions in the foreign exchange market.
However, this exchange rate movement is detrimental to Japanese exporters who gained from the yen's decline.
The dollar fell 2.17% to 143.35 yen, the euro dropped 1.99% to 156.72 yen, and Bitcoin decreased 11.70% to $52,217.
As for the banking sector, “Bank stocks faced significant pressure,” Agence France-Presse reported.
In Japan, Mitsubishi UFJ Financial Group shares dropped 13.5%, Sumitomo Mitsui Financial Group 14.6%, Mizuho 12.8%, and Nomura 18.6%.
In Europe, UniCredit Bank fell by 6.54%, Intesa Sanpaolo by 5.57%, Deutsche Bank by 5.12%, Société Générale by 5.05%, and Barclays by 5.05%.
Technology stocks dropped sharply, with ASML down 4.46% and BE Semiconductor Industries down 5.17% in Amsterdam. In Frankfurt, Infineon fell 2.34%, while in Paris, STMicroelectronics dropped 5.10% and Capgemini declined 2.93%.
