LONDON (AFP)
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's tech-heavy Nasdaq Composite index tumbled 6.3 per cent at the open, with the S&P 500 falling 4.2 per cent and the Dow dropping 2.7 per cent.
Major European indices were down around three per cent in afternoon trading. Tokyo's Nikkei tanked more than 12 per cent on its worst day since the Fukushima crisis in 2011. 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 that the unemployment rate had reached its highest level since October 2021.
The report came two days after the US Federal Reserve decided, as expected, to keep interest rates at a 23-year high while signalling that it could cut them in September.
"Investors are gripped by fears that the Federal Reserve has waited too long to pivot on its policy, especially in light of Friday's disappointing US jobs data and a slew of other weak economic indicators pointing toward a looming recession," said market analyst Fawad Razaqzada at City Index and FOREX.com.
Friday's much-anticipated report showed the US economy 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's high rates, which aimed to slash inflation, could be plunging the economy 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 currency 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.
Bitcoin, oil retreat
Markets tumbled on Monday, with Brent North Sea crude reaching its lowest level in more than six months despite heightened Middle East tensions. Bitcoin slumped more than 10 per cent to under $50,000.
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 and interest rate moves are upending the trade.
Some analysts pointed to the "Sahm rule", which says an economy is in the early stages of recession if the three-month moving average of unemployment is 0.5 percentage points above its low over the previous 12 months. That was triggered by Friday's data.
That helped fuel sharp drops in Asia markets, and US tech shares also pulled down Wall Street indices.
Shares in AI chip manufacturer Nvidia plunged 14.6 per cent at the start of trading on Monday.
Shares in Facebook, Instagram, and parent company Meta slumped by 7.2 per cent.
Microsoft and Google parent company Alphabet shares were down around five per cent.