Key Insights
- Asian markets plummet, with Japan’s Nikkei 225 erasing all 2024 gains and falling 12.40%.
- South Korean exchanges hit circuit breakers as Kospi and Kosdaq indices fall 8.77% and 11.3% respectively.
- Sell-off follows weak U.S. jobs report, raising global recession fears; China’s services sector shows growth.
TOKYO/SEOUL (MarketsXplora) – Asian stock markets tumbled on Monday, with Japan’s Nikkei 225 erasing all its gains for the year and South Korean exchanges hitting circuit breakers, as a wave of selling gripped the region following a weak U.S. jobs report.
The Nikkei 225 plummeted 12.40% to close at 2,227.15, wiping out its year-to-date gains and marking its worst two-day performance since the COVID-19 market crash in March 2020. The broader Topix mirrored the decline, also falling 12.40%.
Japanese trading houses bore the brunt of the sell-off, with Mitsubishi, Mitsui and Co, Sumitomo, and Marubeni all plunging over 14%. Mitsui was the hardest hit, shedding nearly 20% of its market capitalization.
The yen strengthened to its highest level against the dollar since January, trading at 142.09, adding pressure to export-oriented stocks.
In South Korea, the Kospi index plunged 8.77% to 2,441.55, while the small-cap Kosdaq saw an even steeper decline of 11.3%, closing at 691.28. The magnitude of the sell-off triggered circuit breakers, halting trading on both indices for 20 minutes in the afternoon.
“This is a panic-driven market reaction,” said Kim Sung-hwan, an analyst at KB Securities in Seoul. “Investors are reassessing global growth prospects in light of the disappointing U.S. jobs data.”
Other Asian markets also suffered significant losses. Taiwan’s benchmark index fell over 8%, with tech and real estate stocks leading the decline. Australia’s S&P/ASX 200 dropped 3.7% to 7,649.6, as investors awaited the Reserve Bank of Australia’s monetary policy decision due Tuesday.
Hong Kong’s Hang Seng index was down 1.62% in late trading, while mainland China’s CSI 300 fell 1.21% to 3,343.32, showing more resilience compared to its regional peers.
The market turmoil follows Friday’s sharp declines on Wall Street, where all three major U.S. indices fell after a weaker-than-expected July jobs report stoked recession fears. The tech-heavy Nasdaq entered correction territory, falling more than 10% from its recent high.
Despite the broad market sell-off, China’s service sector showed signs of improvement. The Caixin services purchasing managers’ index rose to 52.1 in July from 51.2 in June, indicating faster growth driven by new business and expanded service offerings.
Investors are now looking ahead to key trade data from China and Taiwan this week, as well as central bank decisions from Australia and India, for further cues on the regional economic outlook.
“The coming days will be crucial in determining whether this is a short-term correction or the beginning of a more prolonged downturn,” said Hiroshi Watanabe, senior economist at Sony Financial Group in Tokyo. “Much will depend on how policymakers respond to these market movements.