U.S. recession fears spark selloff in international markets
U.S. stocks looked on course to open in the red Monday, which Japanese stocks suffering their worst day of trading since the 1980s.
LONDON — U.S. stocks were on course for their worst opening of the post-pandemic era Monday as Wall Street continued to react to worse-than-expected jobs data, as well as a massive overnight sell-off in Japanese markets.
In premarket futures trading, the Dow Jones Industrial Average dropped as much as 1,000 points or 3%, the S&P 500 was down 3.4% and the tech-heavy Nasdaq was set to slide by 5% at the open.
That’s mild compared to the pounding Japanese stocks received overnight. One of the country's main stock indexes fell 12.2%, among the worst days since 1987’s “Black Monday” — the sudden and unexpected global stock market crash that raised fears of a depression.
While the rout in Japan was driven in part by the U.S. jobs data, traders added fuel by winding down so-called "carry" trades that had seen them borrowing at previously lower interest rates offered for yen to buy assets more cheaply.
But a rise in the value of the Japanese yen against the U.S. dollar — making Japanese assets more expensive for holders of other currencies — has suddenly made the carry trade less profitable.
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