The week started with what is known in the financial world as a “Black Monday”. On Monday, the main index of the Tokyo stock exchange, the Nikkei, plummeted by 13.4%. This is the second biggest drop in its history.
Japanese Finance Minister Shunichi Suzuki tried to send a calm message: “The Executive is closely monitoring the fall of the stock market.” According to analysts, the event was motivated by the sharp strengthening of the yen and the fear of a recession in the US. But they also incorporate another ingredient. The Japanese markets had been on a significant rise, supported by low interest rates. A more aggressive stance by the Bank of Japan (BoJ) in recent weeks, which includes rate increases and a reduction in bond purchases, shook up this panorama. This “carry trade” strategy (buying at a lower rate and selling at a higher one) was giving good business to many investors and now “it is being cut off.”
This was not the only shock in Asia. The Seoul Stock Exchange fell 8.77% at the close of trading on Monday. Taiwan also saw significant declines. The main European stock exchanges opened the day in the red, in line with the Asian markets: Milan was down 3.8%; Frankfurt, 3%; Madrid, 2.8%; Paris, 2.7%; and London, 2.4%.
All the specialist media agree on the explanation: the data coming from the US and already reflected on Friday on Wall Street. These are the negative employment and industrial activity figures published on Thursday and Friday in the US, to which were added the disappointing results of some large technology companies.
The US unemployment rate rose two-tenths of a percentage point in July, reaching 4.3%, the highest figure since October 2021. The data fueled fears that the US economy may be buckling under the weight of high interest rates intended to contain inflation.
This afternoon, there could be some news that confirms or contradicts these trends: data on the US services sector will be released by the US Institute for Supply Management.
For now, the wave of stock sales by many companies continues, as does tension among investors and states.
News in development.
Source: www.laizquierdadiario.com
