Japanese and Asia-Pacific Markets Plunge Amid Wall Street Sell-Off and Recession Fears

Friday saw a sharp decline in Japan’s benchmark indexes, with losses reaching up to 5%. This downturn mirrored the broader trend across Asia-Pacific markets, which fell in response to a Wall Street sell-off spurred by recession concerns.

The Nikkei, after already dropping 2.62% on Thursday, hit its lowest point since February before rebounding slightly to end 4.29% down. Similarly, the Topix index mitigated its losses to close 4.36% lower. Significant declines were observed in major Japanese companies such as Softbank Group, Mitsui, Marubeni, and Tokyo Electron.

In addition to the stock market downturn, Japanese government bond yields fell, with the benchmark 10-year JGB yield dropping below 1%, hitting its lowest level since June 20.

Elsewhere in Asia, South Korea’s Kospi index fell 2.71% and the smaller Kosdaq index dropped 2.86%. Despite the broader market declines, K-pop stocks rose, led by Hybe, which saw gains following the announcement of its new business strategy.

Australia’s S&P/ASX 200 index fell by 2.02%, retreating from its all-time high reached the previous day. In Hong Kong, the Hang Seng index decreased by 1.81%, while mainland China’s CSI 300 index fell by 0.74%. South Korea reported higher-than-expected inflation for July, with the consumer price index rising 2.6% year on year, slightly above the forecast of 2.5%.

The negative sentiment in Asia followed a sell-off on Wall Street, where all three major U.S. indexes dropped significantly on Thursday due to recession fears. The Dow Jones Industrial Average fell 1.21%, the S&P 500 dropped 1.37%, and the tech-heavy Nasdaq Composite declined by 2.3%. The Russell 2000 index, which had been rallying recently, also fell by 3%.

In the U.S., recent economic data heightened fears of a recession and concerns that the Federal Reserve might delay cutting interest rates. Initial jobless claims saw their largest increase since August 2023, and the ISM manufacturing index indicated economic contraction with a reading of 46.8%, worse than anticipated. Consequently, the yield on the 10-year Treasury fell below 4% for the first time since February.