MOSCOW, August 5, Nadezhda Sarapina. The economic problems of the United States, coupled with the tightening of monetary policy, led to the collapse of the Japanese stock market. Investors are losing money by dumping assets. The wave of shocks has even reached Russia. What will happen next is in the article .
Bear Market
Following the trading results on August 5, Nikkei 225, the key indicator of the Tokyo Stock Exchange (TSE), fell by 12.4 percent to 31,458.42 points. At its peak, the decline reached 13.23 percent. The daily decline of 4,451.28 points broke the record of 1987 — then, on October 20, the indicator lost 3,836.48 in a day.
Losses of the index of companies with large capitalization (the highest value of shares) Topix reached 12.23 percent (2,227.15 points). The collapse relative to July is 24 percent, Bloomberg notes.
Over three days, the benchmark showed its worst result since 1959. The hardest hit were technology companies (Sony was down 7.61 percent as of August 5), as well as banks: government bonds hit a 1999 low of 0.75 percent (lost 17 basis points). The securities of the financial holding Mitsubishi UFJ Financial Group hit a record low the decline in history is 18 percent.
Investors are dumping assets to avoid losses, Capital.Com senior market analyst Kyle Rodda told Bloomberg. This could lead to a sustained decline in stock prices, a so-called bear market.
The Roots of the Problem
One of the reasons for the shock is the Bank of Japan's increase in the key rate, Bloomberg adds. The regulator raised it to a 15-year high — from 0-0.1 to 0.25 percent. Further growth is not ruled out. The economic problems of the country's key partner, the United States, had an impact.
«On Friday, a report on the American labor market was published. Unemployment in July unexpectedly rose from 4.1 percent to 4.3 percent of the working population,» says economist and communications director at BitRiver Andrey Loboda. The indicators have been deteriorating for the fourth month in a row.
«New jobs in July outside the agricultural sector were only 114 thousand. There were more in June, and the market expected an increase. American investment banks assessed this data as a signal of an imminent recession,» the economist clarifies.
On Monday, trading on the American stock exchange began with a fall in the Dow Jones indices by 2.8%, NASDAQ by 5.8%, and S&P 500 by 4%. Apple shares lost 6%, NVIDIA by 12%.
CNBC points out that the so-called «fear index» (the volatility index of the American stock market) Wall Street CBOE Volatility Index (VIX) jumped to its highest since the market collapse due to the pandemic in 2020. At 17:10 Moscow time, it is 41.93 points (an increase of 80.7%).
Experts believe the reaction of the Japanese market is natural. «Tokyo has a big business with Washington. And also with Beijing — if there is negative news from there, then the Nikkei 225 index will fall,» says Oleg Kalmanovich, chief analyst at Neomarkets.
World Wide Web
Other markets also reacted, especially in neighboring regions. Thus, Taiwan's Taiex stock exchange fell by 8.4 percent, and Korea's Kospi by eight.
The MSCI Asia Pacific Asian stock index lost 4.9 percent, almost reaching the catastrophic level of 2020. A quarter of the losses were accounted for by giants: TSMC, Samsung Electronics, Toyota Motor, and Mitsubishi UFJ Financial Group.
And the pan-European Stoxx index fell by about three percent. As the NYT notes, the decline affected all major markets on the continent.
Including the Russian one. On the Moscow Exchange — minus 1.53 percent. True, it was not the Japanese panic that had an effect, but the deterioration of the dollar's position.
«Despite the isolation of the Russian economy, the probability of a weakening American currency and a fall in the markets is immediately felt. A very strong ruble is fraught with low export revenues, which, in turn, reduces investments. And this pulls the Moscow Exchange index down,» explains Alexander Shneiderman, head of the customer support and sales department at Alfa-Forex.
Nevertheless, it is too early to expect a recession in the US. «The Federal Reserve System will certainly take tough anti-crisis measures. The first reduction in interest rates will probably occur no later than September,» Loboda predicts.
In general, no serious problems are expected in the Russian economy. The market, according to analysts, is quite capable of recouping the negative by the end of the week.