Global Markets Quake As US Economic Signals Stir Alarm; Nikkei Falls Sharply

Japan's Nikkei 225 stock index plunged 12.4 percent on Monday, closing at 31,458.42 points. The broader TOPIX index also fell 12.8 percent, with selling intensifying in the afternoon. This decline follows a report showing U.S. hiring slowed more than expected last month, unsettling global financial markets.

The Nikkei 225 had already dropped 5.8 percent on Friday, marking its worst two-day decline ever. Its most significant single-day drop was a 14.9 percent plunge in October 1987, known as "Black Monday." The recent downturn has erased the euphoria that had driven the Nikkei to over 42,000 points in recent weeks.

Share prices in Tokyo have been falling since the Bank of Japan raised its benchmark interest rate last Wednesday. The Nikkei is now down 3.8 percent from a year ago. One reason for the rate hike was the prolonged weakness of the Japanese yen, which has pushed inflation above the central bank's 2 percent target.

Elsewhere in Asia, South Korea's Kospi plummeted 9.3 percent as Samsung Electronics' shares sank 11.6 percent. Taiwan's Taiex also fell sharply, losing 8.4 percent as Taiwan Semiconductor Manufacturing Co., the world's largest chipmaker, dropped 9.8 percent.

Hong Kong's Hang Seng index lost 2.5 percent to close at 16,519.78 points, while Australia's S&P/ASX 200 declined by 3.8 percent to finish at 7,637.40 points. The Shanghai Composite index initially edged higher but eventually lost 1.2 percent to close at 2,870.34 points.

U.S Market and Economic Concerns

On Friday, weaker-than-expected employment data stoked fears that high interest rates might be straining the U.S economy too much. Early Monday saw futures for the S&P 500 and Dow Jones Industrial Average fall by 1.5 percent and 0.7 percent respectively.

The VIX index, which measures investor anxiety about future drops in the S&P 500, fell about 26 percent early Monday. Bitcoin also took a hit, dropping by 14 percent to $54,155 after recently nearing $70,000.

Oil Prices and Investor Focus

Oil prices remained relatively stable; U.S benchmark crude oil gained nine cents to reach $73.61 per barrel while Brent crude stayed flat at $76.81 per barrel.

Investors are now keenly awaiting data from the U.S Institute for Supply Management on the services sector due later Monday to gauge if recent sell-offs are an overreaction.

Fears of Recession

The market rout began shortly after U.S stock indexes had their best day in months following Federal Reserve Chair Jerome Powell’s indication that inflation had slowed enough for potential rate cuts starting in September.

"Specifically, the scenario of higher unemployment constraining spending and further restraining hiring and incomes and economic activity leading to a recession is the feared scenario here," Tan Boon Heng of Mizuho Bank in Singapore said in a report.

The Dow Jones Industrial Average dropped by another 1.5 percent on Friday while the Nasdaq composite fell by an additional 2.4 percent.

This latest downturn has dragged the Nasdaq composite down by ten percent from its record high set last month—a level traders refer to as a "correction."

With inputs from WAM