A New Black Monday global financial markets experienced a dramatic collapse reminiscent of past crises such as Black Monday in 1987, the 2008 financial crisis, and the COVID-19 pandemic in 2020. The day was marked by severe selloffs across various asset classes, driven by a mix of economic concerns and market dynamics.
Global Stock Markets
Major Indexes’ Plummets
- Nikkei 225: The Japanese index fell sharply by 12.4%, its largest daily loss since Black Monday in 1987, reaching a 10-month low at 31,156 points.
- Dow Jones Stoxx Europe 600: The European index dropped by approximately 2.2%, marking a seven-month low at 479.83 points and the third consecutive significant daily loss.
- US Stock Indexes:
- Dow Jones Industrial Average: Declined by 2.6%, or 1,034 points, to 38,703, hitting a two-month low at 38,500 points.
- S&P 500: Fell 3.0%, or 160 points, to 5,186, reaching a three-month low at 5,119 points.
- Nasdaq Composite: Dropped nearly 3.0%, or 545 points, to 17,895, hitting a three-month low at 17,435 points. This loss marked the worst session on Wall Street since September 13, 2022.
Metals Markets
Despite initial positive expectations, metal prices also declined sharply:
- Gold: Fell by 1.35%, reaching a two-week low at $2,364 per ounce.
- Silver: Dropped by 4.6%, hitting a three-month low at $26.94 per ounce.
Cryptocurrency Market
The cryptocurrency sector was not spared from the market turmoil:
- Bitcoin: Experienced a significant drop of $4,128, or 7.0%, reaching a six-month low at $49,577 per unit. Despite recent positive developments, including the launch of Ethereum exchange-traded funds and supportive comments from Republican presidential candidate Donald Trump, the crypto market succumbed to the broader market selloff.
Underlying Causes
1. Carry Trade Unwinding
The acceleration of carry trade unwinding, particularly following the Bank of Japan’s decision to raise interest rates to their highest levels since 2008, played a significant role. Investors, reacting to the higher Japanese yen, rapidly exited positions in high-risk, high-return assets.
2. US Economic Data
Weak economic data from the United States heightened fears of an accelerated recession. The disappointing jobs report and rising unemployment led to concerns that the Federal Reserve might delay or halt anticipated interest rate cuts
further exacerbating market volatility.
3. Divergent Central Bank Policies
The global financial markets were unsettled by the divergent monetary policies of central banks. The tension between different central bank approaches, particularly with the Federal Reserve’s stance compared to the Bank of Japan’s recent moves, contributed to the market’s volatility.
Opinions and Analyses
Jamie Cox, Managing Partner at Harris Financial Group, commented on the situation: “The sales that manifest through wild market fluctuations are sharp and fast but usually short-lived.” Cox suggested that while the volatility is intense
it may be a temporary reaction as markets adjust to the shifting economic and policy landscape.
Conclusion
Monday’s market turmoil, characterized by massive selloffs across global stock markets, metal prices
and cryptocurrencies, underscores the intense uncertainty gripping financial markets. Key factors include the rapid unwinding of carry trades, weak US economic data fueling recession fears
and divergent central bank policies. As markets navigate these challenges, investors remain vigilant, awaiting clearer signals from policymakers and economic indicators.