Historic Stock Market Crash Shakes Global Markets

The international stock exchanges experienced one of the darkest days in their history. In Asia, the markets began with significant declines, which worsened throughout the day. Taiwan's Taiex recorded the heaviest losses ever, while Japan, South Korea, and Australia also registered grim days. The stock market turmoil also affected US futures and European stock markets, with major cryptocurrencies like Bitcoin and Ether suffering notable losses. Even before Monday's debacle, the markets were jittery due to recession fears in the US, caution towards the AI hype, and geopolitical tensions in the Middle East. However, an interest rate hike by the Bank of Japan on July 31 seemed to be the straw that broke the camel's back, according to Tony Sycamore, an analyst at IG Australia, in an interview with Bloomberg TV. This measure brought chaos to the markets, reminiscent of the selling pressure at the onset of the COVID-19 crisis in early 2020. The VIX index, a key volatility indicator, rose by up to 48% on Monday to reach a four-year high. The Nikkei, which had initially reached new record highs in 2024, plummeted dramatically. A weaker yen and an AI rally had previously contributed to the gains. However, the interest rate hike caused the Nikkei to crash by up to 13%, marking the largest point loss in its history. The stock exchange ultimately closed with a loss of 12.4%. Similarly bleak was the picture for South Korea's Kospi, which fell by 8.8%. Trading halts were triggered as heavyweights like Samsung Electronics and SK Hynix suffered massive losses. Taiwanese stocks also experienced a black day. The Taiex fell by 8.4%, the largest loss since trading began in 1967. In Australia, the ASX200 dropped by 3.7%, marking the largest daily loss since May 2020. IT stocks led the losses, while major mining companies like BHP, Fortescue, and Rio Tinto recorded comparatively smaller declines. Cryptocurrencies were also hit hard. Bitcoin fell by 15% overnight and Ether by over 18%. The SEC approval of ETFs for cryptocurrencies had previously led to an upswing, which was now halted by growing recession fears. Europe, too, could not escape the chaos. The Stoxx 600 fell by more than 3% to reach its lowest level since January. The VIX index climbed to over 60 before the US markets opened and the VIX dropped back to 41.5.