Asian stocks tumble with Nikkei 225 falling by 8%, tracking Wall Street’s losses

• Asian equities declined as investors worried about a potential US recession, and moved to offload risk assets.
• Equities fall as central banks adjust monetary policy and concerns grow about a potential hard landing for the US economy.
• The Nikkei 225 Index fell to seven-month lows as investors contended with the possibility of higher interest rates in Japan.

Asian equities declined on Monday, reflecting the losses on Wall Street from Friday, which were driven by worries about a potential US recession and underwhelming earnings from major tech companies. The rapid adjustment of central banks' monetary policies and growing concerns about a hard landing for the US economy are contributing to the swift equity declines. This situation is tied to weaker US job market data and a larger-than-expected contraction in factory activity, as shown by last week's ISM Manufacturing PMI.

US Nonfarm Payrolls (NFP) increased by 114K in July from the previous month of 179K (revised down from 206K). This figure came in weaker than the expectation of 175K, data showed on Friday. Meanwhile, the US Unemployment Rate rose to the highest level since November 2021, coming in at 4.3% in July from 4.1% in June. Additionally, the US ISM Manufacturing Purchasing Managers Index (PMI) tumbled to an eight-month low of 46.8 in July.

Japan’s Nikkei 225 Index fell by up to 8% to approximately 33,000, reaching seven-month lows as investors contended with the possibility of higher interest rates in Japan. Additionally, domestic shares were pressured by a significant rise in the Japanese Yen, which negatively impacted the profit outlook for Japan’s export-driven industries.

India’s NIFTY 50 declined by 1.81% to around 24,250, while the Sensex fell 1.91% to near 79,400, with small-cap and mid-cap indexes dropping over 2% each. Despite this drop, Indian markets have shown relative resilience compared to other Asian and emerging markets, thanks to strong domestic economic fundamentals. While Indian stocks performed somewhat better, the rupee hit a record low, and bond yields fell to their lowest level in two years.

The Shanghai Composite dropped 0.40% to around 2,890, and the Shenzhen Component fell 0.45% to 8,515, marking the third consecutive session of declines for mainland stocks. Despite this, data showed that China’s services sector grew more than anticipated in July, driven by strong demand both domestically and internationally.