Global stock markets experienced a sharp decline on Monday, driven by a large-scale sell-off in technology shares and renewed escalation of geopolitical tensions in the Middle East. South Korea's KOSPI index plummeted over 8%, while Japan's Nikkei 225 and major European indices also recorded significant losses.
Key Factors Driving the Selloff
The global sell-off was primarily driven by two major catalysts. First, stronger-than-expected U.S. non-farm payrolls data released on Friday significantly increased market expectations for Federal Reserve interest rate hikes, putting severe pressure on the valuation bubble in tech stocks that had been fueled by the AI boom. The Philadelphia Semiconductor Index plunged 10% on Friday alone, erasing over a trillion dollars in market value. Second, hostilities between Iran and Israel have escalated again. Reports indicate Israel recently came under missile fire from the direction of Iran, sharply increasing market concerns over the stability of any Middle East ceasefire agreement. Consequently, Brent crude oil futures climbed to around $97.50 per barrel, further heightening worries about inflation and economic growth.
Asia-Pacific Markets Hit Hardest
Asia-Pacific markets were the hardest hit. South Korea's KOSPI index opened with a plunge of over 8%, triggering the country's second level-one circuit breaker of the year and halting trading for 20 minutes. Shares of chip giants Samsung Electronics and SK Hynix fell between 10% and 11% during the session, dragging the broader market lower. Despite earlier positive market sentiment from Nvidia's announcement of collaboration with SK Hynix and other Korean firms on AI data centers, this positive news failed to stem the selling tide. Japanese stocks also suffered heavy losses, with the Nikkei 225 index closing down 3.85% after falling over 3,100 points intraday. Tech stocks like SoftBank Group and Tokyo Electron led the declines.
European and Regional Markets Follow Suit
European markets opened lower across the board, with Germany's DAX 30 index and France's CAC 40 index falling 0.75% and 0.32% respectively. European chip stocks such as ASML and Infineon opened down 3% to 4.5%. Additionally, Israel's TA-35 benchmark index opened 2.5% lower.
Market Outlook and Sentiment
Although U.S. stock index futures showed a slight rebound on Monday, indicating some investors were bargain-hunting, overall market risk aversion remained high. Analysts point out that markets are currently facing a triple test of high valuations, geopolitical risks, and expectations for tighter monetary policy, suggesting volatility may increase further in the short term.
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