The Topix index in Asia experienced a substantial 6.1% decline, marking its most significant drop since 2016, as the Japanese yen remained robust, posing challenges for Japan’s export-driven economy. Meanwhile, Nikkei also fell 5.81%.
There is growing unease among investors in Japan regarding the potential for further interest rate hikes by the nation’s central bank following recent moves. A former executive director overseeing monetary policy suggests that the Bank of Japan’s recent policy shift makes it highly probable for another rate hike in October, with the possibility of quarterly increases.
Manish Bhargava, a fund manager at Straits Investment Holdings in Singapore, highlights the impact of the yen’s strength and weaknesses in the tech sector on the Asian stock market. He emphasizes that Japanese exporters, in particular, are at risk due to the yen’s appreciation, which diminishes the value of their overseas earnings.
At the same time, Treasuries saw continued gains, with the two-year yields hitting a 14-month low as expectations of Federal Reserve rate cuts rose following recent decisions by the central bank. Swap traders have increased projections for rate reductions from two to three for the year.
The risk-averse sentiment was exacerbated by the release of data showing a surge in US weekly unemployment claims to nearly a one-year peak, along with a contraction in manufacturing.
The tech sector experienced losses driven by disappointing earnings reports from industry giants like Intel Corp. and Amazon.com Inc. All eyes are now on the upcoming monthly jobs report scheduled for later on Friday.
