Market rout: Asia stocks plunge after shares fell sharply last week

Stock markets across Asia plunged on Monday, following big falls last week by major indexes around the world.

In Japan, the Nikkei 225 index fell by 12.4%, or 4,451points – its largest points drop in history, while the broader Topix index lost 12.2%.

It comes after weak jobs data in the US on Friday sparked concerns about weakness in the world’s largest economy.

Meanwhile, the yen has been strengthening against the US dollar since the Bank of Japan raised interest rates last week, making stocks in Tokyo more expensive for foreign investors.

“The selloff was instigated by the sharp appreciation of the [yen] as global investors turned cautious on Japanese corporate earnings, especially that of exporters such as automakers,” said Kei Okamura, a Tokyo-based portfolio manager at investment firm Neuberger Berman.

The Japanese currency has strengthened more than 10% against the US dollar over the last month.

A stronger yen makes Japanese goods more expensive, and consequently less attractive for potential overseas buyers.

Unlike other central banks such as the Bank of England and the European Central Bank, the Bank of Japan lifted interest rates last week to the highest level since the global financial crisis in 2008.

Inflation in Japan rose by more than expected in June while the economy shrank in the first three months of the year because of a weaker yen and poor household spending.

Elsewhere in the Asia-Pacific region, Taiwan’s main share index and South Korea’s Kospi both fell more than 8%.

India’s main index, the NSE Nifty 50, was trading 2.8% lower and the S&P/ASX 200 in Australia was down about 3.6%.

The Hang Seng in Hong Kong was down 2.5%, while the Shanghai Stock Exchange was 1.4% lower.

Cryptocurrencies were also down. Bitcoin dropped to around $50,000, its lowest level since February.

On Friday, stocks in New York fell sharply after official jobs data showed that US employers added 114,000 jobs in July, far fewer than expected.

Average jobs growth in the US has been around 150,000 a month.

The figures for July raised concerns that a long-running jobs boom in the US might be coming to an end. It stoked speculation about when – and by how much – the Federal Reserve will cut interest rates.

There are fears that the US economy will slow, despite the most recent data showing that it expanded at an annual rate of 2.8%.

Shanti Kelemen, chief investment officer at M&G Wealth, told the BBC’s Today programme: “You can pick out evidence to create a positive story, you can also pick out the evidence to create a negative story.

“I don’t think it universally points to one direction yet.”

Stock markets were already worried about high borrowing costs and unsettled by signs that a long-running rally in share prices, fuelled in part by optimism over artificial intelligence (AI), might be running out steam.

Friday’s decline in the Nasdaq brought the index down about 10% from its most recent peak – a fall known as a “correction” – that in this case has happened in a matter of weeks.

The Dow Jones Industrial Average also dropped 1.5% on Friday, and the S&P 500 ended 1.8% lower, after markets in Asia and Europe sank.

Over the weekend, veteran US investor Warren Buffett’s firm Berkshire Hathaway revealed that it had sold about half its stake in US technology giant Apple.