Stock Markets and Bitcoin Crash on US Recession Fears: Bitcoin Drops to $54,000
Data on employment in the US raised fears that the Federal Reserve is in no rush to cut interest rates.
Japanese stocks tumbled on Monday, Aug. 5, sending the Nikkei 225 index to its biggest one-day drop of nearly 13%, an all-time record. Global markets are worried about the prospect of a recession in the US, write Financial Times. Disappointing U.S. employment data fueled fears that the Federal Reserve was late to begin cutting interest rates.
Japan’s Topix index fell as much as 11%, erasing a year’s gain. The Nikkei 225 suffered its biggest one-day drop since 1987 on Friday, sending Topix and Nikkei futures to a halt. The sell-off in Japan is expected to continue in Europe and the US as investors brace for renewed market volatility on fears that the Federal Reserve has been too slow to respond to signs of a US economic slowdown.
Traders in Tokyo said the sell-off was part of a larger correction and risk reduction by global funds. In addition, Tokyo stocks have been hurt by the yen’s strengthening of about 9% since mid-July.
The situation in Japan also affected other Asian markets. South Korea’s Kospi fell more than 4% in morning trade, Australia’s S&P/ASX 200 fell nearly 3% and Taiwan’s main stock market index fell more than 6%.
The global volatility spilled over into the cryptocurrency market, with the price of bitcoin falling more than 8% to $54,000 on Monday, while the price of ether, another cryptocurrency, fell nearly 17%.
U.S. stock futures also fell sharply before the open on Monday, with the S&P 500 down 2.8% and the Nasdaq down 5.5%.
Weak US employment data released on Friday, August 2 added pressure on a market already suffering from an outflow of investors from high-priced technology stocks. The Nasdaq fell into a correction zone last week, while US Treasuries rose sharply in price.
The Federal Reserve kept interest rates on hold at last week’s meeting, but the market’s reaction to the jobs data showed that investors saw it as a mistake to expect a rate cut.
The tech-heavy Nasdaq Composite ended the week 3.4% lower and lost more than 10% from July’s all-time high. Treasuries rose in price, with the yield on the 10-year U.S. note hitting its lowest level since December at 3.82%.
Investors are betting that the Federal Reserve will cut borrowing costs by more than a full percentage point by the end of the year to counter a weakening economy.
