Asian markets plunged on Monday due to mounting fears of a possible U.S. recession and escalating tensions in the Middle East.
In currency markets, China's yuan surged to a seven-month high, while the Japanese yen reached its strongest level against the dollar since January. These movements were triggered by the U.S. reporting significantly lower-than-expected job creation in July and an unexpected rise in the unemployment rate to its highest level in nearly three years. Concerns grew that the labor market was weakening, increasing the vulnerability of the economy to a potential recession.
Gold experienced fluctuations in Asian trading, while oil prices continued to decline despite escalating tensions in the Middle East. Reports suggested that the Benjamin Netanyahu-led government of Israel might consider a preemptive strike on Iran to thwart potential attacks.
Chinese markets closed lower, despite data indicating an acceleration in the country's services sector growth in July. The Caixin/S&P Global services purchasing managers' index (PMI) rose to 52.1 from 51.2 in June, marking the 19th consecutive month of expansion. The Shanghai Composite index dropped 1.54 percent to 2,860.70, while Hong Kong's Hang Seng index declined 1.46 percent to 16,698.36.
Japanese markets faced significant selling pressure amid concerns that the U.S. economy might be in worse condition than previously anticipated. The Nikkei average plummeted 12.40 percent to 31,458.42, its largest fall since the "Black Monday" crash in October 1987, when it dropped 14.9 percent. The broader Topix index also fell 12.23 percent to 2,227.15. Tech stocks were particularly hard-hit, as investors unwound positions in the artificial intelligence sector. Screen Holdings, Advantest, Tokyo Electron, and SoftBank Group slumped between 13-19 percent.
In South Korea, Seoul stocks declined for a second consecutive session amidst a tech sector rout. The Kospi average plunged 8.77 percent to 2,441.55, triggering trading curbs such as sidecars and circuit breakers on the exchange for the first time since 2020. Major chipmakers Samsung Electronics and SK Hynix each fell by about 10 percent.
Australian markets experienced their worst two-day decline since the onset of the pandemic. The S&P/ASX 200 benchmark dropped 3.70 percent to 7,649.60 on fears of a hard landing for the U.S. economy. The broader All Ordinaries index tumbled 3.81 percent to 7,859.40, with tech stocks and financials leading the losses.
In New Zealand, the S&P/NZX-50 index ended 1.51 percent lower at 12,264.49.
On Friday, U.S. stocks tumbled after a weak July jobs report and disappointing earnings from companies such as Intel and Amazon fueled worries that the economy might be edging towards a recession under the pressure of the Federal Reserve's high interest rate policy. The 10-year Treasury yield fell to its lowest level since December as data revealed that nonfarm payrolls grew by just 114,000 in July, down from a downwardly revised 179,000 in June and below the 185,000 expected by economists. The unemployment rate rose to 4.3 percent, the highest since October 2021.
The tech-heavy Nasdaq Composite dropped 2.4 percent to its lowest closing level in two months, while the S&P 500 shed 1.8 percent to hit a nearly two-month closing low, and the Dow dipped 1.5 percent, snapping a four-week winning streak.
