The stock market collapsed amid concerns that the US may be heading towards a recession, CNN reported.
Japan's stock market suffered its biggest one-day drop on August 5 as the global sell-off intensified following weak US jobs data.
The Nikkei 225 index ended the day down 4,451 points - the largest decrease in history. The index has fallen more than 12%, pushing its decline up to 24% since the beginning of July. The index has now entered bear market territory, defined as a 20% decline from recent highs.
Amid the sharp market decline, trading was briefly halted in Japan and South Korea to prevent panic selling .
Previously, on August 2, the Nikkei index closed down 5.8%, marking the biggest daily decline since March 2020, as traders worried about the impact of a stronger yen on companies. Japan after the Bank of Japan (BOJ) signaled that it might increase interest rates further. A rising yen will hurt exporters and companies with overseas earnings.
The rapid rise in the Japanese currency also forced many market participants to cancel yen carry trades, an extremely popular trading strategy. With interest rates extremely low in Japan for decades, many investors have borrowed cheap cash there to convert to other currencies and invest in higher-yielding assets.
Last week, the yen increased nearly 5% against the USD. On August 5, this currency continued to increase in price, up 2.2% to 143.3 yen for 1 USD.
"The stronger yen has created a domino effect, driving the cancellation of interest rate carry trading globally," said SPI Asset Management managing partner Stephen Innes.
Since then, the market chaos has turned into a "full-blown avalanche", fueled by a sudden hawkish shift from the BOJ, slowing China's economic growth and data. Weakness data of US technology giants.
Last week, the BOJ raised interest rates by 15 basis points to 0.25% in its second increase this year and announced plans to gradually taper bond purchases.
China's PMI fell in July, signaling continued weakness in manufacturing activity.
In the US, Amazon reported unsatisfactory earnings for the second quarter and a disappointing outlook for the third quarter. Intel reported an earnings loss of $1.6 billion in the second quarter and announced plans to cut 15% of its workforce to reduce costs.
Other Asia-Pacific markets also plunged on August 5.
The Korean stock exchange has applied a "circuit breaker" measure to temporarily suspend trading of the benchmark Kospi index after the index fell more than 8%.
Taiwan's (China) Taiex index fell 8.4% - its worst day ever.
Australia's S&P/ASX 200 fell 3.6%. Hong Kong's Hang Seng Index (China) and China's Shanghai Composite fell 2.6% and 1.2%, respectively.
Asian shares fell sharply on Wall Street on August 2, as disappointing jobs data increased concerns that the US economy was weakening. The Dow closed down 1.5%, the S&P 500 lost 1.8% and the Nasdaq Composite fell 2.4%.
Other markets are also showing concern. On August 2, oil prices stabilized at their lowest level since January. Brent crude oil futures and US WTI crude oil prices both fell more than 3%.
Regarding US domestic gas prices, the storm in the Gulf of Mexico could cause gas prices to increase. Storm No. 4 Debby strengthened rapidly before making landfall in Florida.
