Market expects “bloody Monday” with losses on the stock markets

Fears of a recession in the United States, the fall in big tech stocks and tension in the Middle East caused stock markets in Asia and Oceania to plummet this Monday (5.Aug.2024). Indexes in Europe opened lower and there is an expectation that the financial market will experience a “Bloody Monday”.

O Nikkei 225the Tokyo Stock Exchange’s stock market index, closed down 4,451.28 points (-12.40%) on Monday (5 August) to 31,458.42. It is the biggest loss since 1987. The broader Topix index fell 12.23% to 2,227.15 points.

See the closing of Stock Exchanges in Asia and Oceania and how the markets are operating this Monday (5th August) in Europe until 8:35 AM:

Markets around the world are under pressure from weak US employment data. The unemployment rate in the country stood at 4.3%, 0.2 percentage points higher than the figure recorded in June (4.1%).

Furthermore, the Fed (Federal Reserve, the US central bank) announced last Wednesday (31 July) that it would maintain US interest rates in the range of 5.25% to 5.50%, the same level since July 2023.

The main reason for the rate remaining high is to control inflation. More expensive credit slows down consumption and production. As a result, prices tend not to rise as quickly. In June, annual inflation in the US was 3% over the 12 months, a slowdown of 0.3 percentage points compared to the previous month.

Both occurrences caused fears of recession, which had repercussions on the financial market.

Stock markets are also affected by the performance of big tech companies in the market, such as Amazon, Microsoft and Google.

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Amazon shares on Nasdaq

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Microsoft shares on Nasdaq

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Alphabet (Google) shares on Nasdaq

The scenario also involves rising tensions in the Middle East. Last week, Israel killed Hamas political leader Ismail Haniyeh in a bold action in Tehran, Iran. On the day of the inauguration of the new Iranian president Masoud PezeshkianIsmail was killed in his bedroom. Iran’s supreme leader, Ali Khamenei, vowed revenge.

There are a number of speculations. The main one is a joint attack by groups allied with the theocratic regime. Iran, Hezbollah (Lebanon), Houthis (Yemen), Hamas (Gaza Strip) and Shiite militias in Iraq and Syria would attack the Jewish country.

It would be almost a repeat of April, when Iran launched 400 projectiles at Israel after an attack attributed to the Israelis on a building adjacent to the Iranian embassy in Damascus, Syria. But only one hit its target that time.

In his statements, Prime Minister Benjamin Netanyahu (Likud, right) raised his tone. In the April attack, Israel did not send missiles to retaliate. Now, the prime minister has hinted that, if the action is repeated, the response will be immediate.

In addition to the human tragedy, a situation of this nature tends to have a strong impact on the price of oil. Almost ⅓ of the global commodity passes through the Strait of Hormuz, between Iran and the Arabian Peninsula.