Global stock markets have plummeted due to fears that the US Federal Reserve may have delayed cutting interest rates for too long, potentially harming the world’s largest economy.
Asian shares took a significant hit, with Japan’s Nikkei 225 index closing down 5.8%, marking its worst day in four years. This followed weaker-than-expected US factory data, which showed output dropping to an eight-month low in July amid a slump in new orders.
Federal Reserve Chairman Jerome Powell indicated on Wednesday that a potential first interest rate cut could come in September, as policymakers maintained interest rates at 23-year highs of 5.25% to 5.5%.
However, markets in Hong Kong, South Korea, China, and Australia also dropped sharply as traders anticipated that the Fed would be compelled to cut interest rates at all three of its remaining meetings this year.
The sell-off was further intensified by a Big Tech downturn on Wall Street, with disappointing results from Apple, Intel, and Amazon.
Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Asset Management, commented, “I didn’t expect stocks to fall this much. This is probably due to concerns that the US economy will collapse significantly, which is the worst-case scenario for Japanese stocks.”
José Torres, a senior economist at Interactive Brokers, remarked, “The initial satisfaction from Fed chief Powell indicating decent odds of a September rate cut has soured as investors now fear that the central bank isn’t acting quickly enough.”
