Tokyo led a plunge across Asian stock markets on Monday, after weak US jobs data fanned fears of a recession in the world’s top economy and boosted bets on several Federal Reserve interest rate cuts.
The sell-off followed another hefty day of losses on Wall Street, where heavyweight tech firms including Amazon and Microsoft took the brunt owing to worries an AI-fuelled rally this year may have been overdone.
A much-anticipated report Friday showed the US economy added just 114,000 jobs last month, well down from June and far fewer than expected, while the jobless rate rose to the highest level since October 2021.
The news came a day after lacklustre factory data that stoked concerns that Fed officials may have held borrowing costs at more than two-decade highs too long.
That has led to speculation the economy could be in for a hard landing and tip into recession.
Markets are “still reeling from last Friday’s seismic shifts in the global financial landscape”, said Stephen Innes in his Dark Side Of The Boom newsletter.
“The trigger? A US employment report that missed the mark so badly didn’t just drop jaws – it dropped stocks and bond yields while sending volatility and rate cut expectations through the roof.”
He pointed out that “the mood was already souring in Asia” after a disappointing bath of earnings from tech titans such as Tesla and Alphabet as well as a rate hike by the Bank of Japan and more weak Chinese economic data.
“Mix these, and you have the perfect market meltdown recipe.”
The losses in New York were followed in Asia, with Tokyo’s Nikkei tanking more than 7% at one point. The Nikkei was down around 6% in afternoon trading, while Taipei and Seoul were also heavily sold.
The selling was also making officials in Tokyo sit up after the Nikkei shed 5.8% on Friday – its biggest loss since 2021 during the pandemic. The market is down almost 20% from its record high touched just a month ago.
Japan’s top government spokesperson Yoshimasa Hayashi said it “will continue to stay on its toes and monitor market developments with keen interest”.
“We’re aware there are various evaluations regarding the stocks plunge this time around, and about the status of the Japanese economy, but the government will continue its efforts to completely break free of deflation and to transition to a growth-driven economy.”
The biggest losers were tech firms, with chip titan TSMC losing more than 6% in Taipei, while Seoul-listed Samsung was off more than 5% and SK Hynix down about 4%.
Hong Kong and Shanghai dropped, with traders brushing off a set of directives released by China aimed at boosting household consumption in the world’s number two economy.
There were also big losses in Sydney, Singapore, Manila, Jakarta and Wellington.
The US central bank had signalled after its latest meeting Wednesday that slowing inflation and a softening labour market meant it could cut next month, with traders predicting two or three 25-basis-point reductions before January.
Now there is speculation it will lower rates a full percentage-point in that time.