The Nikkei 225, Japan’s leading stock index, experienced a significant drop of 3%, extending its losing streak to six days. This downward trend was further aggravated by the steep decline of 9% in SoftBank Group’s stock and Renesas Electronics plummeting more than 14%. The broader Topix index also fell by 2.24%, indicating a widespread sell-off in the Asian market. Additionally, the strengthening of the yen against the U.S. dollar for four consecutive days added to the negative sentiment in the market. The Bank of Japan’s upcoming monetary policy meeting on July 30 and 31 is expected to focus on a possible rate hike and a reduction in bond buying, reflecting concerns about the economic outlook.
A significant development in Japan was the agreement to raise the average minimum hourly wage to 1,054 yen ($6.90), representing a 5% increase. This wage hike is expected to have implications on the overall economy, providing the Bank of Japan with more flexibility in considering a rate increase. The move towards higher wages aims to create a “virtuous cycle” of increasing prices and wages, which could stimulate economic growth in the long run.
South Korea’s second-quarter GDP growth of 2.3% fell slightly below economists’ expectations of 2.5%, indicating some challenges in the country’s economic recovery. The quarter-on-quarter contraction of 0.2% was unexpected, reflecting a decline from the previous quarter’s growth. The negative performance of South Korea’s Kospi index, along with the decline in the heavyweight SK Hynix stock by 6%, further added to the downward trend in Asian markets.
China’s decision to cut the medium-term facility lending rate to 2.3% from 2.5% is part of its ongoing efforts to stimulate the economy. This move follows the reduction in the loan prime rates earlier in the week, signaling the Chinese central bank’s commitment to supporting economic growth. The impact of these stimulus measures on the broader Asian market remains to be seen, as investors assess the overall economic outlook in the region.
The negative sentiment in the Asian market was echoed in the global markets, with the S&P 500 and Nasdaq Composite experiencing their worst days since 2022. The tech-heavy Nasdaq index recorded a significant decline of 3.64%, while the Dow Jones Industrial Average dropped by 1.25%. Tech giants like Nvidia, Meta Platforms, and Alphabet witnessed substantial losses, reflecting the broader sell-off in the tech sector. Tesla’s stock also faced a significant decline of 12.3%, highlighting weaker-than-expected results and a decline in auto revenue.
The recent downturn in Asian markets, particularly in Japan and South Korea, has raised concerns about the overall economic recovery in the region. The impact of China’s stimulus measures and the global market trends further contribute to the uncertainty in the investment landscape. Moving forward, investors will closely monitor central bank policies, economic data releases, and corporate earnings reports to gauge the direction of the financial markets.
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