Straits Times Index dives over 4% as regional markets join global stock rout

FROM Tokyo to Taiwan, stock indexes in Asia-Pacific were swimming in a sea of red on Monday (Aug 5) after dismal unemployment data in the US last Friday triggered recession worries and a global sell-off.

It was a volatile trading day for many key benchmarks, with a few recovering only to concede more ground after the noon break.

Tokyo’s Nikkei 225 led the losses, plunging 12.4 per cent, although it had at one point narrowed the drop from 7 per cent to 4.6 per cent. However, the decline resumed in afternoon trading.

These came after the meltdown on the Wall Street last Friday, following a report showing US hiring slowed markedly while the unemployment rate rose to 4.3 per cent, the highest in nearly three years.

The rise in the jobless rate caused its three-month moving average to exceed the 12-month low by half a percentage point. According to the Sahm rule – devised by former Fed economist Claudia Sahm – that means a recession is under way.

DBS Group Research in a report published on Monday noted that the US gross domestic product, trade, and labour force figures are “not alarming”, even as signals from hiring, retail sales and purchasing managers’ index are negative.

“It is crucial to maintain perspective,” economists at the research house said. “We are not joining the herd in pricing in 75-100 basis points in rate cuts in second half of 2024. Fifty basis points would be adequate.