A global stock selloff intensified on Friday as investors grappled with mounting concerns over the health of the US economy and the performance of major tech firms.
The decline was exacerbated by expectations of further monetary tightening in Japan, leading to a sharp drop in Japanese shares and setting a grim tone for markets worldwide.
Asian Markets Take a Hit
The Topix index in Japan fell by 6.1%, marking its worst single-day performance since 2016. The Japanese yen strengthened significantly, trading near its highest level since March, which negatively impacted Japan’s export-driven economy.
Major Asian markets, including South Korea and Hong Kong, also saw substantial declines. Notably, AI chipmaker SK Hynix Inc. experienced a dramatic drop, tumbling as much as 10.6%.
Tech Sector Woes
In the US, disappointing earnings reports from tech giants such as Intel Corp. and Amazon.com Inc. contributed to the broader market malaise.
Intel’s projection of lower-than-expected third-quarter revenue and Amazon’s profit forecast that fell short of analysts’ estimates sent both companies’ shares down in after-hours trading.
The broader US stock market reflected these tech sector troubles, with S&P 500 futures falling 0.7% and Nasdaq 100 futures declining 1.3%.
This followed data showing US weekly unemployment claims had reached an almost one-year high and manufacturing had contracted, further stoking fears of an economic downturn.
European Markets Follow Suit
The Euro Stoxx 50 futures slid by 0.9%, indicating a similar trend in European markets. Investors are increasingly worried about the potential for a hard landing in the US economy, which would have significant repercussions for global markets.
Monetary Policy and Economic Data
The selloff was compounded by the outlook for the Bank of Japan (BOJ) to hike interest rates further following its recent policy shift. According to a former BOJ executive director, another interest rate hike in October is highly likely, with the potential for quarterly increases thereafter.
The yen’s recent appreciation has particularly impacted Japanese exporters, eroding the value of their overseas earnings.
In the US, Treasury yields fell as traders bet on the Federal Reserve cutting rates more aggressively in response to economic data.
The two-year yield touched a 14-month low, and the 10-year yield dropped below 4%, reflecting increased demand for safe-haven assets.
Market Reactions and Investor Sentiment
“The recent strengthening of the Japanese yen coupled with tech sector weakness is poised to significantly impact the Asian stock market,” said Manish Bhargava, a fund manager at Straits Investment Holdings in Singapore. “Japanese exporters are particularly vulnerable to the yen’s appreciation, as it erodes the value of their overseas earnings.”
The MSCI Asia Pacific Index declined by as much as 3.6%, the most in over three years, with tech and industrial companies among the top losers.
The broader risk-off tone across global markets underscores the growing unease among investors about the economic outlook.
Economic and Corporate Outlook
Looking ahead, the focus will shift to the US government’s July employment report, due later today. Economists expect a moderation in job growth, with the unemployment rate anticipated to remain steady at 4.1%.
However, if job additions fall short of expectations, it could exacerbate fears of a looming recession.
Elsewhere in Asia, a Chinese central bank policy adviser issued a rare critique of Beijing’s economic policies, urging the government to ramp up fiscal stimulus and promote inflation to counteract economic sluggishness.
In the corporate world, Apple Inc. is pressuring Tencent Holdings Ltd. and ByteDance Ltd. to make fundamental changes to China’s most popular apps, a move that could further inflame tensions in the world’s largest smartphone market.
Commodities and Safe Havens
In commodities, oil prices rose after a decline on Thursday, against the backdrop of concerns that Middle East tensions might impact supply.
Gold climbed, reflecting stronger demand for safe-haven assets amid market volatility.
The global stock selloff highlights the interconnected nature of today’s markets, where economic indicators and corporate earnings reports can have far-reaching impacts.
As investors navigate these turbulent times, the focus remains on central bank policies, economic data, and corporate performance to gauge the future direction of the markets.
