Wall Street stocks deepened their losses Monday and Tokyo had its worst day in 13 years as panic spread across trading floors over fears of recession in the United States.
Wall Street鈥檚 tech-heavy Nasdaq Composite index tumbled 6.3 per cent at the open, with the S&P 500 falling聽4.2 per cent and the Dow dropping聽2.7 per cent.
Major European indices were down around three per cent in afternoon trading.
Tokyo鈥檚 Nikkei tanked more than 12 per cent in its worst day since the Fukushima crisis in 2011.聽It also suffered its biggest ever points loss, shedding 4,451.28.
The market meltdown was triggered by a weak US jobs report on Friday which showed the unemployment rate reached its highest since October 2021.
The report came two days after the US Federal Reserved decided, as expected, to keep interest rates at a 23-year high while signalling that it could cut them in September.
鈥業nvestors are gripped by fears that the Federal Reserve has waited too long to pivot on its policy, especially in light of Friday鈥檚 disappointing US jobs data and a slew of other weak economic indicators pointing toward a looming recession,鈥� said market analyst Fawad Razaqzada at City Index and FOREX.com.
Friday鈥檚 much-anticipated report showed the US聽economy聽added just 114,000 jobs last month, well down from June and far fewer than expected, and unemployment at 4.3 per cent.
The news came a day after lacklustre factory data.
Investors fear the Fed鈥檚 high rates, which aimed to slash inflation, could be plunging the聽economy聽towards a hard landing and recession instead of the soft landing sought by the central bank.
Expectations that the Fed could cut more aggressively than expected from September, or even be forced into an emergency reduction this month, sent the dollar sliding against the yen.
The Japanese聽currency聽was boosted also by a Bank of Japan interest-rate hike last week, analysts said.
The dollar went under 142 yen for the first time since January.
Markets tumbled across the board Monday, with Brent North Sea crude reaching the lowest level in more than six months despite heightened Middle East tensions, while bitcoin slumped more than 10 per cent to under $50,000.
鈥楢side from ongoing worries about a US recession, the continuation of the pressure on markets has been attributed to unwinding of the yen carry trade and geopolitical fears surrounding an expected Iranian military retaliation against Israel after Israel killed a high-ranking Iranian military official,鈥� said Briefing.com analyst Patrick O鈥橦are.聽
Many investors have borrowed at low interest rates in a weak yen to invest in higher yielding currencies, but the abrupt surge in the yen as well as interest rate moves is upending the trade.
Some analysts pointed to the 鈥楽ahm rule鈥�, which says an聽economy聽is in the early stages of recession if the three-month moving average of unemployment is 0.5 per centage points above its low over the previous 12 months. That was triggered by Friday鈥檚 data.
O鈥橦are also noted big falls in tech and semiconductor shares.
That helped fuel sharp drops in Asia markets and US tech shares were also pulling down Wall Street indices.聽
Shares in AI chip manufacturer Nvidia plunged 14.6 per cent at the start of trading on Monday.
Shares in Facebook and Instagram parent company Meta slumped 7.2 per cent.
Microsoft and Google parent company Alphabet shares were down around five per cent.