Asian stock markets, including Japan’s Nikkei 225, experienced a substantial decline as fears of a global economic slowdown intensified. The Nikkei 225 extended its losing streak for the sixth consecutive day, plummeting by 3%. This decline was led by heavy losses in SoftBank Group, which nosedived by 9%, and Renesas Electronics, down more than 14%. The broader Topix index also fell by 2.24%. Additionally, the yen strengthened against the U.S. dollar, reaching an 11-week low of 152.28. These significant losses in the Japanese market are reflective of a broader sell-off across the region following a sharp decline on Wall Street.
The Bank of Japan is expected to discuss a rate hike at its upcoming monetary policy meeting scheduled for July 30 and 31. There are speculations that the central bank may also outline a plan to halve its bond buying activities. The recent strengthening of the yen against the dollar and the agreement to increase the minimum hourly wage in Japan could provide the Bank of Japan with more flexibility to consider a rate hike as it aims for a “virtuous cycle” of rising prices and wages.
Investors in the region also assessed South Korea’s second-quarter GDP numbers, which came in slightly below expectations. The country’s GDP grew by 2.3% year-on-year, falling short of the 2.5% forecasted by economists. On a quarter-on-quarter basis, South Korea’s economy contracted by 0.2%, contrary to the 0.1% growth expected. This led to losses in South Korea’s Kospi and Kosdaq indexes, with heavyweights like SK Hynix dragging down the markets despite reporting record quarterly revenue and profits.
The negative sentiment in Asian markets extended to other regions, with Hong Kong’s Hang Seng index slipping by 1.65% and China’s CSI 300 down by 0.98%. China’s central bank’s decision to cut the medium-term facility lending rate is seen as a move to stimulate the economy further following recent rate cuts. In Australia, the S&P/ASX 200 lost 0.94% amid the broader market decline.
The sell-off in global markets also affected U.S. stocks, with the S&P 500 and Nasdaq Composite recording their worst days since 2022. The S&P 500 index dropped by 2.31%, closing at 5,427.13, while the Nasdaq slid by 3.64% to end at 17,342.41. The Dow Jones Industrial Average shed 504.22 points, or 1.25%, closing at 39,853.87. Tech giants like Nvidia, Meta Platforms, and Alphabet faced significant losses, with Tesla experiencing its worst day since 2020 on weaker-than-expected results and a decline in auto revenue.
The recent turmoil in global stock markets reflects growing concerns about the economic outlook, with investors reacting to a combination of domestic and international factors. The uncertainties surrounding central bank policies, GDP growth figures, and corporate earnings have contributed to the sell-off across regions, signaling a challenging period ahead for investors.
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