Equities, cryptocurrencies, and commodities tumbled around the world, while safe-haven assets like bonds and the yen surged on Monday. The global markets sell-off was triggered by a confluence of factors, including disappointing economic data, rising geopolitical tensions, and fears of aggressive interest rate cuts.
Japan’s Nikkei 225 index led the rout, plummeting 12% to its lowest level in nine months. The benchmark entered bear market territory, marking its steepest one-day decline since the infamous Black Monday crash of 1987.
In the US, the S&P 500 and Nasdaq Composite both dropped more than 3%, while the Dow Jones Industrial Average shed over 1,000 points. European stocks also suffered heavy losses, with the Stoxx 600 index falling by 3%.
The fear of a US recession intensified after Goldman Sachs raised its probability of a downturn in the next 12 months to 25%. Disappointing US jobs data released on Friday further stoked these concerns.
“The global market is reeling as bears enter with a cocktail of bad news,” said Santosh Meena, Head of Research at Swastika Investmart Ltd. “The fear of a reverse Yen carry trade, following an interest rate hike in Japan, was the initial catalyst. This was compounded by fears of a recession in the USA after extremely poor job data, which spooked market sentiment. China and Europe are already grappling with slowdowns, and escalating geopolitical tensions are adding further pressure on the markets.”
Bitcoin, a barometer of risk appetite, plunged more than 10%, erasing over $100bn in market value. Meanwhile, oil prices declined despite heightened tensions in the Middle East.
Emerging markets were not spared. The Egyptian Exchange (EGX) faced a significant downturn due to escalating geopolitical tensions. The EGX 30 index fell by 2.33% at the close of Monday’s trading, while the EGX 70 plummeted 5%, and the EGX 100 dropped 4.31%. The market cap lost EGP 56bn.
Other Asian markets, including those in Taiwan, and South Korea, also experienced significant declines.
Major Gulf stock markets mirrored the decline in Asian shares. Saudi Arabia’s TASI fell 3.1%, while Qatar’s QSI dropped 2.5%, and Dubai’s DFMGI decreased by 4.2%. Abu Dhabi’s index also fell by 2.7%. This decline occurred despite ongoing volatility in oil prices, which usually stabilises the region’s markets.
As investors sought refuge from the turmoil, government bond yields declined, with the US 10-year Treasury yield hitting a one-year low. The Japanese yen strengthened to a seven-month high.
The sharp market downturn has intensified speculation about the Federal Reserve’s monetary policy path. Some analysts believe the central bank may need to implement aggressive interest rate cuts to prevent a severe economic slowdown.
