Newsroom
Global stock markets experienced significant declines on Monday as concerns about a potential US recession led investors to abandon risky assets. The Japanese Topix index plummeted 12.2%, marking its worst day since "Black Monday" in 1987. In the US, the Nasdaq Composite dropped 3.2%, and the S&P 500 fell 2.5%. Major tech stocks were hit hard, with Nvidia down 8.1%, Apple 5.3%, and Tesla 5.4%.
The Vix index, a measure of expected market volatility, surged to its highest level since 2020, reflecting widespread investor anxiety. Analysts attributed the sell-off to fears that the Federal Reserve has been slow to address signs of a weakening US economy, potentially necessitating rapid interest rate cuts. Market expectations now suggest a series of cuts totaling 1.25 percentage points over the Fed's remaining meetings this year.
Contributing to the turmoil was the unwinding of the yen carry trade, as traders exited positions that benefited from Japan's low interest rates. The yen has appreciated about 13% since mid-July, further fueled by the Bank of Japan's recent rate hike. This has prompted significant liquidations in Japan, with the Topix and Nikkei futures hitting circuit-breaker levels to halt trading.
In Europe, the Stoxx Europe 600 fell 2.7%, while South Korea's Kospi and Australia's S&P/ASX also saw substantial declines. Cryptocurrency markets were not spared, with Bitcoin dropping 20% and Ether 27%.
Adding to market pressures, Warren Buffett’s Berkshire Hathaway disclosed it had reduced its stake in Apple and increased its cash reserves to a record $277 billion. Despite some recovery in US markets following better-than-expected services sector data, the outlook remains uncertain, with calls for the Fed to lower rates more aggressively to stave off a potential recession.
[Source: Financial Times]
