Japanese stocks tumble amid tech sell-off and US recession features
Japanese stocks have experienced their most significant drop since entering a bear market a month ago. This downturn was primarily driven by an unfavorable US manufacturing report and a global tech sell-off. The Nikkei 225, Japan's blue-chip stock average, saw a decrease of up to 4.7%, before finally settling at a loss of 4.2%. This is the largest fall since the 12% crash on August 5.
Tech sector slump and currency fluctuations impact Japanese stocks
The tech sector's slump was led by chipmakers like Disco Corp., following news of NVIDIA being subpoenaed by the US Justice Department. This development resulted in NVIDIA extending its losses in after-hours trading, further impacting Japanese stocks. Additionally, a stronger yen has been identified as another factor contributing to the market downturn.
Commodity prices and US recession fears affect Japanese stocks
Falling commodity prices have also negatively impacted resource-related stocks in Japan. Trading house Mitsui & Co saw a decline of 6% due to this trend. "The decline in commodity prices is stoking worries about recession," said Tomoichiro Kubota from Matsui Securities. Additionally, concerns about a potential US recession were reignited by weak manufacturing data, further affecting Japanese shares.
Analysts view market drop as temporary reaction
Despite the significant market drop, some analysts view this as a temporary reaction rather than the beginning of another meltdown. "Today's fall is just a reaction to big drop in New York shares overnight," said Kohei Onishi from Mitsubishi UFJ Morgan Stanley Securities Co. He further suggested that equities are likely to rally toward year-end once uncertainties around events including economic data are removed leading up to the next Fed decision.
Japanese banks and bond yields affected by market downturn
The market downturn also affected Japanese banks, with firms like Mitsubishi UFJ Financial Group Inc. experiencing a drop as Japan's 10-year government bond yield fell 3.5 basis points to 0.885%. This follows declines in long-term Treasury yields on bets that the Federal Reserve will cut rates to avoid a recession.
