Tokyo experienced a significant decline on Friday, leading to losses across Asia due to a stronger yen and speculation of more Japanese rate increases. Equities were also impacted after weak data sparked concerns of a potential US recession and a downturn on Wall Street.
The negative sentiment spread to Europe, with Frankfurt, London, and Paris all falling ahead of key US non-farm payrolls data, which will provide further insight into the largest economy in the world.
“The market is currently worried that the US economy is slowing down faster than anticipated, and the tone of the US payrolls report will play a crucial role in either alleviating or exacerbating these concerns,” said Rabobank analyst Jane Foley to AFP.
After Federal Reserve Chairman Jerome Powell suggested on Wednesday that interest rates could be reduced in September, the initial optimism has now turned into apprehension that the US slowdown might be more severe than previously estimated.
The Federal Reserve has been monitoring indicators to confirm a decrease in inflation and a softening labor market while trying to avoid a sharp decline in business activity. It had been confident in achieving a “soft landing.” However, recent reports indicated a faster-than-expected contraction in the US factory sector in July and a lower job creation rate in the private sector compared to expectations.
This setback, coupled with disappointing earnings reports from major tech companies, including Intel announcing significant job cuts and reporting losses, led to a sharp drop in all three main indexes in New York on Thursday, with the Nasdaq falling by over two percent.
Asian markets also suffered losses on Friday, particularly in the tech sector. The Nikkei 225 experienced a significant decline of 5.8 percent, the largest drop since the beginning of the pandemic four years ago, driven by a stronger yen impacting Japan’s export sector.
Other markets in Asia, including Hong Kong, Sydney, Seoul, Taipei, Shanghai, Mumbai, Bangkok, Singapore, and Jakarta, also recorded losses. The Bank of Japan’s decision to raise interest rates for the second time in 17 years and the Bank of England cutting its main interest rate for the first time since the Covid pandemic broke out in 2020 contributed to the market turmoil.
– Key figures around 1050 GMT –
London – FTSE 100: DOWN 0.6 percent at 8,232.83 points
Paris – CAC 40: DOWN 1.0 percent at 7,300.50
Frankfurt – DAX: DOWN 1.6 percent at 17,793.52
Euro STOXX 50: DOWN 1.8 percent at 4,680.21
Tokyo – Nikkei 225: DOWN 5.8 percent at 35,909.70 (close)
Hong Kong – Hang Seng Index: DOWN 2.1 percent at 16,945.51 (close)
Shanghai – Composite: DOWN 0.9 percent at 2,905.34 (close)
New York – Dow: DOWN 1.2 percent at 40,347.97 (close)
Dollar/yen: DOWN at 148.80 yen from 149.66 yen on Thursday
Euro/dollar: UP at $1.0819 from $1.0750
Pound/dollar: UP at $1.2736 from $1.2735
Euro/pound: UP at 84.94 pence from 84.71 pence
West Texas Intermediate: UP 0.3 percent at $76.56 per barrel
Brent North Sea Crude: UP 0.3 percent at $79.75 per barrel
dan-rfj/rl
