( Barron's )
Japanese stocks spiraled lower and the yen surged against the dollar as Asian trading saw the beginning of what is shaping up to be a tumultuous Monday in global markets.
Worries over the prospect of a U.S. recession rose into the end of last week, and were punctuated by Friday’s weaker-than-expected U.S. jobs report and non-farm payrolls figure for July, which sent the S&P 500 tumbling into the weekend. The global fallout from worries over a U.S. slowdown are now being laid bare amid volatile and trigger-happy overseas trading.
“Markets were on edge before Friday but a weak payrolls has really escalated a profound move across the globe,” said Jim Reid, a strategist at Deutsche Bank. “We are seeing some astonishing moves already…markets are melting down in Asia.”
The moves are eye-watering. Tokyo’s benchmark Nikkei 225 plunged 12.4%, by far the biggest faller in Asia, though Hong Kong and Shanghai also recorded losses, with the Hang Seng Index and Shanghai Composite down 2% and 1.5%, respectively.
Japan’s currency, the yen, strengthened 2.4% against the U.S. dollar, a blistering move in foreign exchange markets, in “what looks to be a huge position squaring exercise,” said Deutsche Bank’s Reid.
As European markets opened on Monday it was more of the same. London’s FTSE 100 dropped more than 2% at the open, with the Paris CAC 40 2.2% into the red and Frankfurt’s DAX falling 2.4%.
“The FTSE 100 has opened down as the U.S. sneeze risks becoming a cold,” said Derren Nathan, head of equity research at British broker Hargreaves Lansdown. “U.S. futures suggest markets may fall further before finding a support level.”
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