A global stock selloff deepened as worries grew over the health of the US economy and the technology sector. Japanese shares plummeted due to expectations of more domestic monetary tightening, adding to the negative sentiment.
The Euro Stoxx 50 futures slid 0.9%, while US contracts also dropped. In Asia, the Topix index fell 6.1%, marking its worst day since 2016, as the yen traded near its strongest level since March, impacting Japan’s export-driven economy. Shares across South Korea and Hong Kong also declined, with AI chipmaker SK Hynix Inc. falling as much as 10.6%.
Meanwhile, US Treasuries extended their rally, with the policy-sensitive two-year yields hitting a 14-month low, as investors increased bets on Federal Reserve rate cuts following the central bank’s recent decision. Traders are now anticipating three rate cuts this year, up from two previously expected.
The broader market downturn followed data showing US weekly unemployment claims reached nearly a one-year high, while manufacturing activity shrank. The tech sector faced significant losses due to disappointing earnings outlooks or results from major companies like Intel and Amazon. Attention now shifts to the upcoming monthly jobs report.
In Japan, concerns are mounting over potential interest rate hikes by the central bank, following recent policy shifts. The yen’s appreciation poses a challenge for Japanese exporters, as it diminishes the value of their overseas earnings. The MSCI Asia Pacific Index dropped as much as 3.6%, its largest decline in over three years, with tech and industrial companies leading the losses.
Intel announced that third-quarter revenue would likely disappoint, while Amazon projected lower-than-expected profits, sending both companies’ shares lower in after-hours trading.
US Treasuries continued to advance on Friday, with the 10-year yield dipping below 4%, reflecting a stronger demand for safe-haven assets. The two-year note’s yield also fell, adding to the previous day’s decline.
The yen continued its rally, reaching around 149 per dollar. The pound fell after the Bank of England cut rates and signaled further cautious reductions ahead. Renewed concerns about the US economy’s health also affected Japanese shares.
Economists expect a slowdown in job growth in the upcoming July employment report. They predict the unemployment rate will remain steady at 4.1%.
Elsewhere in Asia, a Chinese central bank policy adviser criticized Beijing’s economic policies as overly conservative, urging for increased fiscal stimulus and inflation promotion. The CSI 300 index in China extended losses after a brief rally.
In corporate news, Apple is pressuring Tencent Holdings and ByteDance to make significant changes to their apps in China, which could escalate tensions in the country’s largest smartphone market.
In commodities, oil prices rose following a Thursday decline amid concerns about Middle East tensions affecting supply. Gold also saw an increase.
