Investing.com — Asian shares fell sharply on Monday, extending last week’s losses amid growing fears of a US economic slowdown, with Japanese markets poised to enter a bear market from their record highs in July .
Markets followed a slump on Wall Street on Friday after substantially weaker-than-expected nonfarm payrolls data raised concerns that the Federal Reserve will keep interest rates high for too long before the economy can experience a soft landing. Other mediocre economic data during the week and mixed gains from heavyweight technology stocks also weighed on US markets, providing weak signals for regional stocks.
U.S. stock index futures fell further in Asian trading on Monday.
Japanese Nikkei, TOPIX eye bear market
The Japanese index fell 5.5% on Monday, while the broader sector tumbled almost 7%. Both indices are now trading more than 20% lower than July’s record highs, which would put them into a bear market if they closed at current levels.
Japanese shares were hit by a mix of heavy profit-taking, with foreign investors retreating en masse as the Japanese yen appreciated sharply.
This trend was fueled by aggressive signals from the Bank of Japan, after the central bank raised rates last week and signaled more potential rate hikes in 2024.
Mediocre profits from heavyweight car manufacturer Toyota Motor (NYSE:) Corp (TYO:) set a somber tone for Japanese markets, with a slew of major earnings from the country this week. Sony Corp (TYO:) and SoftBank Group Corp. (TYO:) will report in the coming days.
Chinese losses limited by some positive PMI data
China and the indexes fell relatively less than their peers, having already suffered steep losses in the past two months.
The two indexes fell 0.3% and 0.4% respectively, remaining at their lowest point in more than five months. Hong Kong’s index fell 1%.
The private sector showed on Monday that China’s services sector grew slightly stronger than expected in July, showing some resilience in the economy.
These figures helped improve sentiment towards China somewhat, following last week’s gloomy manufacturing data.
A series of key Chinese economic figures, including and dates, are expected this week.
Asia is surrounded by concerns about growth
Broader Asian markets tumbled as appetite for risk-driven equities was hit by the prospect of worsening economic conditions. Safe havens such as the Japanese yen and gold saw inflows.
Australian yields fell 2.5%, with the focus shifting on Tuesday, where the central bank is widely expected to keep rates steady.
The South Korean stock fell 5.5%, leading to extended losses due to weakness in technology stocks. The sector has been plagued by a mix of profit-taking and mediocre profits from major US technology companies.
Futures for the Indian index pointed to a negative open, with Indian shares heading for more profit-taking after the Nifty rose to record highs above 25,000 points last week.
