Sell-Off Echoes Across Asia-Pacific Markets

The Asia-Pacific (APAC) markets continued the sell-off from last week due to a fear of the United States entering a recession.

Japan led a dip in the stock market performance across APAC markets as the Nikkei 225 index fell 12.4% today, the worst losses since the stock market crash of 1987. Nikkei 225 hit an all-time high of 42,426.77 points only the last month. Another major index in Japan, the Tokyo Stock Price Index (TOPIX), fell as much as 12.8% today, marking the biggest daily crash since 1987.

The stock prices have declined in Japan since the country’s central bank hiked its benchmark interest rates last week. Market leaders such as Mitsubishi, Mitsui and Co., Sumitomo and Marubeni slipped around 10%.

Screenshot: Nikkei 225 Index price movement within 52 weeks, by CNBC

But the market's drastic performance isn’t limited to Japan. The dip is apparent across APAC markets. A recent report released by the U.S. government can explain such a dramatic phenomenon in the APAC region.

The U.S. Bureau of Labor Statistics released its much-anticipated employment report on 2 August. The report showed that only 114,000 more jobs were created in the country in July, far below the expected figure and much below the June figure.

The unemployment rate rose by 0.2% to 4.3% in July, the highest level since October 2021. The number of unemployed people increased by 352,000 to 7.2 million in the last month. The figure stood at 5.9 million a year earlier.

The latest report has intensified a global fear about the U.S. economy entering a long recession. In response, the stock market in the U.S. began to plummet.

• The Dow Jones Industrial Average futures fell 1.5%.

• S&P 500 futures fell 2.1%.

• Nasdaq-100 futures fell 3.4%.

Naturally, the APAC markets too reacted negatively. The Korea Composite Stock Price Index (KOSPI), South Korea’s benchmark for the stock market, dipped 9.3% as Samsung’s shares sank 11.6%. KOSDAQ, a small cap index in the country, sank around 12%. The Taiwan Weighted Index (TWII) slipped 8.4%, while the Taiwan Semiconductor Manufacturing Co. fell nearly 10%. The company is the world’s biggest chip maker and Taiwan's largest company.

However, China saved the day as the CSI 300 index fell only 1.2%, not too bad considering the dramatic decline in other APAC markets. 

The CSI 300 is an index tracking the top 300 stocks traded on the Shanghai Stock Exchange. The Hang Seng Index, the benchmark index of Hong Kong SAR, fell around 1.5%. Even Bitcoin (BTC) which recently surged to around $70K, fell 14% to $54K on Monday.  

The Federal Reserve will decide on interest rates in the U.S. next September, and markets worldwide will closely watch the outcome.  

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