Asian Stock Markets Slide as Global Recession Fears Loom

Japan's stock markets saw significant declines on Monday, driven by the Bank of Japan's rate hike and global recession concerns. The Nikkei 225 index fell over 1600 points. Similar trends were observed in Taiwan and Singapore. Experts predict continued volatility until the U.S. Federal Reserve adjusts rates.

In a turbulent start to the trading week, Japanese stock indices recorded substantial losses during Monday's early session. The Nikkei 225 index plunged by more than 1600 points, marking a 4.85% drop to 34,247.56, as Japan's markets fell 20% from recent all-time highs.

The sharp decline followed the Bank of Japan's widely anticipated rate hike, which triggered a significant appreciation of the Yen and subsequent unwinding of Yen Carry trades. Foreign investors, wary of a potential U.S. recession, began offloading Japanese stocks. 'The fall is not really due to Japan-specific reasons,' explained Naka Matsuzawa, chief strategist at Nomura Securities, to Nikkei Asia. 'Markets are still trying to find the bottom.'

Matsuzawa does not anticipate a global recession but expects market volatility until the U.S. Federal Reserve lowers rates, with speculations of a rate cut by September. Taiwan's markets mirrored this trend, with the Taiwan Weighted index declining over 6%, and Singapore's Straits Times index dropping around 3%.

Globally, markets reacted to the activation of the 'Sahm Rule' on Friday, forecasting a U.S. recession as unemployment reached 4.3%. The indicator, developed by Claudia Sahm, has a perfect record of predicting recessions. Banking expert Ajay Bagga noted that, despite global bearish sentiment, robust domestic liquidity might cushion the Indian markets. Following global cues, India's Sensex and Nifty ended last week down by 1.1-1.2%, closing at 80,981.95 and 24,717.70 points, respectively.

(With inputs from agencies.)