Japanese stocks took a hit as the Nikkei 225 extended its six-day losing streak by plunging 3%. This decline was led by heavy losses in Nikkei heavyweight SoftBank Group, which nosedived 9%. Additionally, Renesas Electronics saw a more than 14% drop in its stock price. The broader Topix index also fell by 2.24%. Adding to the woes, the yen strengthened for the fourth consecutive day against the U.S. dollar, reaching an 11-week low of 152.28.
The Bank of Japan is expected to discuss a rate hike at its upcoming monetary policy meeting on July 30 and 31. There are speculations that the central bank may detail a plan to halve its bond buying. This move could have significant implications for the Japanese market and global economy as a whole.
A Japanese government panel has agreed to increase the average minimum hourly wage in the country to 1,054 yen ($6.90), representing a 5% raise. This hike in wages could potentially give the Bank of Japan more flexibility to consider a rate increase. The central bank aims to create a “virtuous cycle” of rising prices and wages to stimulate economic growth.
Investors also assessed South Korea’s second-quarter GDP figures, which fell slightly below expectations. The country’s GDP grew by 2.3% year-on-year, lower than the 2.5% anticipated by economists. On a quarter-on-quarter basis, the economy shrank by 0.2%, contrary to the predicted 0.1% rise. This decline had a ripple effect on South Korea’s Kospi and Kosdaq indexes, which lost 1.8% and 2.32% respectively.
China’s central bank recently cut the medium-term facility lending rate to 2.3% from 2.5% in an effort to bolster its economy. This move follows the lowering of loan prime rates earlier in the week. Despite these efforts, Hong Kong’s Hang Seng index slipped by 1.65%, and the mainland Chinese CSI 300 was down by 0.98%.
The Asian market turmoil had a knock-on effect on other global markets, with the S&P 500 and Nasdaq Composite experiencing their worst days since 2022. The S&P 500 lost 2.31%, closing at 5,427.13, while the Nasdaq slid 3.64% to end at 17,342.41. The Dow Jones Industrial Average also shed 504.22 points, or 1.25%, closing at 39,853.87. Tech giants like Nvidia, Meta Platforms, Alphabet (Google’s parent company), and Tesla all suffered significant losses, further adding to the market volatility.
The recent turmoil in Asian markets, particularly in Japan and South Korea, has sent shockwaves across global financial markets. The decisions made by central banks and governments in these countries will play a crucial role in stabilizing the situation and restoring investor confidence. As the world waits for further developments, it is essential to closely monitor the economic indicators and policy announcements to gauge the trajectory of the market in the coming days and weeks.
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