Stock Market
Dax Slide Continues – Markets in Asia and Bitcoin Plummet
Asian stock markets fell on Monday
© Kyodo / Picture Alliance
Fears of a looming recession in the USA contributed to significant drops in Asian stock markets and the Dax on Monday. The negative sentiment is also impacting cryptocurrency prices.
In light of a sell-off in Asian stock markets, the Dax continues its recent slide. The German benchmark index tumbled 3 percent on Monday morning to 17,127.22 points, reaching levels seen at the end of February.
Investors reacted primarily to the sharp drop in Asian markets. Fears of a global economic downturn have led to the Japanese Nikkei index suffering its largest loss in 37 years. The index, which comprises 225 stocks, closed down 12.5 percent at 31,420 points. The broader Topix index also fell by 12.2 percent. “Especially the reignited fears of recession in the USA have caught investors off guard,” said Timo Emden from Emden Research. “Anything associated with risk is avoided in such moments.”
US Recession More Likely
Analysts from Goldman Sachs have raised the probability of a recession in the next twelve months by ten percentage points to 25 percent; JPMorgan is even estimating a 50 percent chance. Given these prospects, Goldman Sachs is now forecasting interest rate cuts by the Fed in September, November, and December by a quarter percentage point each.
These prospects hit the Japanese banking sector particularly hard. The relevant sector index fell by 17.3 percent and was the worst performer among the 33 industry indices on the Tokyo Stock Exchange. Meanwhile, the technology sell-off continued. Chipmaker Tokyo Electron reported the biggest loss with 18.5 percent decline. Sensitive to economic cycles, stocks like the fashion company Fast Retailing also experienced losses. The shares of Uniqlo’s parent company dropped 9.6 percent. On the bright side, positively received economic data limited losses in China. The Shanghai stock exchange fell 1.4 percent. The index of the major companies in Shanghai and Shenzhen declined by 1 percent.
The US markets were also not spared from recession fears. The Dow Jones closed on Friday with a loss of 1.5 percent at 39,737.26 points. The broader S&P 500 lost 1.8 percent to close at 5,346.56 points, and the tech-heavy Nasdaq dropped 2.4 percent to 16,776.16 points. Moreover, tech stocks were affected by a report that chip producer Nvidia is delaying the launch of new AI chips due to design flaws. Nvidia had recently been a major beneficiary of the AI boom and a driver of the overall stock market rally.
This week, more companies will release important quarterly results, including Caterpillar and Walt Disney.
Bitcoin and Ether – Cryptocurrencies Plunge
Cryptocurrencies were also drawn into the downward spiral. Bitcoin fell to as low as $51,600 on the Bitstamp trading platform on Monday morning. This is the lowest level since February. Already on Friday, it had lost about $10,000 in value. Ether, the second most important cryptocurrency, plunged around 15 percent to $2,340. This also affected the newly launched Ethereum ETFs. Overall, the market capitalization of all cryptocurrencies decreased by approximately 14 percent to $1.85 trillion.
A week ago, Bitcoin had risen to nearly $70,000. Statements from Republican US presidential candidate Donald Trump had driven the cryptocurrency toward its peak, which was last reached in March at just under $74,000. Trump had promised to make the USA the “crypto capital of the planet and a Bitcoin superpower” if he returns to the White House after the November election.