After market quake

Japan’s leading index slowly recovers

Asian markets are being watched closely around the world (here a US trader on Wall Street).

(Bild: APA/AP)

Following the historic slide of Japan's leading index, the Nikkei, on Monday and the global market quake, Asian stock markets are slowly recovering. The Nikkei-225 benchmark index climbed 10.23 percent to 34,675.46 points on Tuesday.

However, it did not make up for the losses of the previous day, when it fell by over twelve percent to its lowest level since November of the previous year. The European stock exchanges in Frankfurt am Main, Paris and London also fell on Monday. In the USA, the Dow Jones lost 2.6 percent and the Nasdaq technology index fell by 3.4 percent.

It was a "Black Monday" in Japan, but also on stock exchanges worldwide.

(Bild: AP)

Background to the turbulence
According to analysts, the turbulence was caused in particular by weak economic data from the USA, which fueled concerns about a possible recession. On Friday, an eagerly awaited labor market report was published in Washington, according to which only 114,000 new jobs were created last month - significantly fewer than in June and far fewer than expected. At the same time, the US unemployment rate rose to its highest level since October 2021.

Prior to this, weak US industrial data had already raised the question of whether the Fed might have kept the key interest rate and thus also borrowing costs at their highest level in 23 years for too long. Investors are gripped by fears that the Fed has waited too long "to change its policy, especially in light of Friday's disappointing US labor market data and a slew of other weak economic indicators that point to a looming recession," said market analyst Fawad Razaqzada of City Index and Forex.com.

Has the US central bank backed the wrong horse?

(Bild: Aaron Kohr - stock.adobe.com)

Investors' nerves severely strained
A capital market strategist at Robomarkets sees investors' nerves being severely frayed. The twelve percent drop in the leading Japanese index Nikkei-225 is food for thought. The Middle East conflict is escalating. "An attack by Iran on Israel (...) seems only a matter of time." At the same time, the unemployment rate in the US has risen to its highest level in three years. "The Fed has held on to high interest rates for too long and the economy is threatening to slide into recession."

Analyst Stephen Innes also pointed out that sentiment in Asia had already deteriorated after companies such as Tesla and Alphabet posted disappointing earnings, the Japanese central bank raised interest rates and Chinese economic data weakened, in view of the sharp fall in share prices in Tokyo on Monday. Mixed together, this is the "perfect recipe" for a market collapse, she explained.