Tokyo, Aug 02 (V7N) - Tokyo’s Nikkei 225 dropped more than 5% on Friday, leading losses across Asia due to a stronger yen and anticipated further Japanese rate hikes. Disappointing US economic data triggered a steep decline on Wall Street and intensified concerns about a potential US recession.

Earlier optimism surrounding Federal Reserve Chair Jerome Powell’s suggestion of possible rate cuts in September has waned. Recent data showing a faster-than-expected contraction in the US factory sector for July and weaker job growth in the private sector have raised concerns about the pace of the economic slowdown.

The US private sector added only 122,000 jobs in July, down from June’s revised figure of 155,000, and unemployment claims spiked more than anticipated. The focus is now on the upcoming major jobs report for a clearer view of the labor market.

The negative sentiment is exacerbated by a disappointing earnings season from major tech companies. Intel announced it would cut over 18,000 jobs and reported a $1.6 billion loss for the past quarter, predicting further disappointing results for Q3. Microsoft, Amazon, Tesla, and Alphabet also reported weaker-than-expected results, leading to speculation about overvaluations of tech stocks.

In New York, all major indexes fell, with the Nasdaq dropping over 2%. Tokyo saw a significant decline, with the Nikkei 225 falling 4.9%, driven by the yen's appreciation impacting Japan’s export sector. Japanese tech companies, including Tokyo Electron and Sony, were hit hard, reflecting losses similar to those experienced by their US counterparts.

Daiwa Securities noted, “Following the declines in New York stocks, the BoJ’s rate hike, and the yen's further appreciation, market sentiment is deteriorating quickly.”

Other Asian markets also suffered, with Hong Kong and Sydney down more than 2%, and significant losses in Seoul, Taipei, Shanghai, Wellington, Manila, Singapore, and Jakarta.

The yen strengthened to 148.51 per dollar, its strongest level since March, following the Bank of Japan’s second rate hike in 17 years. This move contrasts sharply with the yen’s near 126 level at the beginning of July, its weakest in almost four decades.

The pound also fell against the dollar after the Bank of England cut its main interest rate for the first time since the pandemic began.

Key figures around 0230 GMT:

  • Tokyo - Nikkei 225: DOWN 4.9% at 36,261.85
  • Hong Kong - Hang Seng Index: DOWN 2.2% at 16,921.26
  • Shanghai - Composite: DOWN 0.6% at 2,913.91
  • Dollar/yen: UP at 149.51 yen from 149.66 yen on Thursday
  • Euro/dollar: UP at $1.0790 from $1.0750
  • Pound/dollar: DOWN at $1.2718 from $1.2735
  • Euro/pound: UP at 84.81 pence from 84.71 pence
  • West Texas Intermediate: UP 0.7% at $76.84 per barrel
  • Brent North Sea Crude: DOWN 0.6% at $80.03 per barrel
  • New York - Dow: DOWN 1.2% at 40,347.97 (close)
  • London - FTSE 100: DOWN 1.0% at 8,283.36 (close)

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