US stock markets fell sharply on Monday as part of a massive global sell-off fueled by fears of a US recession. Japan's Nikkei 225 index plunged as much as 12% in its worst day since the Wall Street crash on "Black Monday" in 1987.
Concerns about a US recession were the main cause of the fall in global markets after Friday's disappointing July jobs report. Investors are also worried that the Federal Reserve is too late to cut interest rates to support the economic slowdown, with the central bank opting to keep rates at their highest levels in two decades last week.
Additionally, there is a cancellation of the once-hot artificial intelligence trades. Technology stocks were among the worst hit in early trading Monday.
In Asia yesterday, Japanese stocks confirmed a bear market as Asia-Pacific investors had their first chance to react to Friday's dismal US jobs figures. The Nikkei's 12.4% loss to close at 31,458.42 was the worst day for the index since the 1987 "Black Monday" that hit Wall Street. The loss of 4,451.28 points on the index was also the largest in terms of points in its entire history. The Dow lost more than 22% in one day on “Black Monday”.
Other global markets were also badly affected. US Treasury yields fell amid fears of a recession and as investors moved to bonds as a global safe haven. Bond prices move inversely with yields. The benchmark 10-year note on Friday posted a yield of 3.76%, down from 4.20% a week earlier and the lowest in a year.
Bitcoin fell from nearly $62,000 on Friday to around $50,000 on Monday. Europe's Stoxx 600 was down 2.6% in London. The CBOE Volatility Index jumped to more than 53, the highest since the start of the pandemic in 2020.
There was also talk of canceling the yen's "carry trade" which added to the fall in global markets after the Bank of Japan raised interest rates last week. The yen is gaining value against the US dollar.
On Friday, the Nasdaq snapped a third straight week of losses, sending the technology-heavy index down more than 10% from a record set last month. The S&P 500 also posted its third straight week of losses, down 2% for the week. Even the Dow Jones Industrial Average, which had been outperforming, broke a four-week record gain, falling 2%. The S&P 500 entered Monday's session down 5.7% from its recent all-time high.
Economic data due out on Monday included the ISM Services PMI for July, a measure of the performance of US services companies which is expected to show an increase to 50.9, up from 48.8 previously.
