Nikkei Drops 12% on US Market Woes
Markets around the world have started the week in a mini-panic, with worries about a slowing US economy cutting billions in value off some of the world's biggest technology companies.
For most of the year, investors had driven global stock markets higher, convinced that central banks were getting inflation under control.
But Monday morning was the first chance for traders in Tokyo to react to an August 2 report showing that US employers slowed their hiring in July by much more than economists had expected.
That was the latest piece of data on the US economy to come in weaker than expected. It's raised fears that the US Federal Reserve slowed the nation's economy too much and for too long through high interest rates, which were designed to slow inflation.
Meanwhile, the Bank of Japan raised interest rates last week, a move that was already causing turmoil in markets there. Then, on Monday, the country's Nikkei index plunged more than 12% — its worst drop since the "Black Monday" crash of 1987.
Investors are now listening to warnings that Apple, Nvidia and other "Big Tech" stocks have gotten too expensive as the tech-heavy Nasdaq index continued its own plunge that began last week. Apple fell more than 5% on Monday.
Traders in the US are betting the Federal Reserve will lower interest rates by half a percentage point in September instead of the usual quarter point. Some are calling for an emergency rate cut.
However, some say the sell-off is a good thing because stock prices had risen too high. Experts are saying that, for individual investors, it's not a time to panic sell, but a moment to make sure their investments are properly diversified.
In a note to clients on Monday, Chris Zaccarelli of the Independent Advisor Alliance wrote that investors should wait to see how events play out. He also said that it's not yet clear if the recent weakness in the labor market is a sign of greater problems, or if it's just a temporary cooling of the job market.
