Asian Shares Plummet On US Recession Concerns

Asian shares plummeted on Monday amid fears of a possible U.S. recession and concerns over an escalating Middle East conflict.

China’s yuan leapt to a seven-month high, and the Japanese yen hit its highest levels against the dollar since January after the U.S. reported much lower-than-expected job creation in July and the unemployment rate unexpectedly rose to its highest level in nearly three years, heightening fears the labor market was deteriorating and potentially making the economy vulnerable to a recession.

Gold fluctuated in Asian trade while oil extended losses from the lowest close in seven months despite rising tensions in the Middle East, with reports suggesting the Benjamin Netanyahu-led government could sanction a pre-emptive strike on Iran to prevent an attack on Israeli soil.

Chinese markets ended lower as weak global cues overshadowed data showing growth in the country’s services activity accelerated in July.

The Caixin/S&P Global services purchasing managers’ index (PMI) rose to 52.1 from 51.2 in June, pointing to expansion for the 19th straight month.

China’s Shanghai Composite index fell 1.54 percent to 2,860.70 while Hong Kong’s Hang Seng index dipped 1.46 percent to 16,698.36.

Japanese markets saw intense selling pressure on concerns that the U.S. economy may be in worse shape than previously expected.

The Nikkei average nosedived 12.40 percent to 31,458.42, marking its biggest fall since “Black Monday” in October 1987, when it plunged 14.9 percent. The broader Topix index settled 12.23 percent lower at 2,227.15.

Tech stocks suffered heavy losses due to an unwinding of the artificial intelligence trade. Screen Holdings, Advantest, Tokyo Electron and SoftBank Group slumped 13-19 percent.

Seoul stocks fell for a second straight session amid a tech rout. The Kospi average plunged 8.77 percent to 2,441.55, triggering trading curbs of sidecar and circuit breakers on the exchange for the first time since 2020. Chip heavyweights Samsung Electronics and SK Hynix fell around 10 percent each.

Australian markets suffered their worst two-day decline since the start of pandemic. The benchmark S&P/ASX 200 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 losses.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 index ended 1.51 percent lower at 12,264.49.

U.S. stocks tumbled on Friday as a weak July jobs report as well as disappointing earnings from the likes of Intel and Amazon ignited worries that the economy could be falling into a recession under the weight of the Federal Reserve’s policy of high interest rates.

The 10-year Treasury yield fell to its lowest since December as data showed nonfarm payrolls grew by just 114,000 last month, down from a downwardly revised 179,000 jobs in June and below the 185,000 expected by economists. The unemployment rate increased to 4.3 percent, the highest since October 2021.

The tech-heavy Nasdaq Composite plunged 2.4 percent to its lowest closing level in two months, the S&P 500 shed 1.8 percent to hit a nearly two-month closing low and the Dow dipped 1.5 percent to snap a four-week winning streak.