Markets tumble, led by 5.8% drop in Tokyo following a tech-driven retreat on Wall Street

AP Business Writer

BANGKOK (AP) — World shares tumbled Friday, with Japan’s Nikkei 225 index slumping 5.8% as investors panicked over signs of weakness in the U.S. economy.

The declines followed a retreat on Wall Street after weak data raised worries the Federal Reserve may have missed its window to cut interest rates before it undercut economic growth. Fed Chair Jerome Powell said a cut could come in September after the U.S. central bank held steady at a meeting this week.

“The short-lived satisfaction of Fed Chief Powell communicating decent odds of a September rate cut has turned sour as investors are now panicking that the central bank isn’t trimming soon enough,” José Torres, a senior economist at Interactive Brokers, said in a commentary.

The weak economic numbers raised the stakes for an already highly anticipated employment report coming on Friday.

A nearly 19% decline in Intel’s shares in aftermarket trading added to the gloom. The chipmaker said it was cutting 15% of its massive workforce — about 15,000 jobs — to better compete with more successful rivals like Nvidia and AMD.

Japan’s market suffered its worst loss since 2020 as the Nikkei 225 in Tokyo lost more than 2,000 points to 35,907.17, with banks’, technology-related and manufacturers’ shares hit by heavy selling.

Mitsubishi UFJ Financial Group Inc. plunged 11.2%. Toyota Motor Corp.’s shares fell 3.4%, Sony Group Corp.’s shares lost 6.6% and SoftBank Group Corp. declined 7.7%.

Chip maker Tokyo Electron dived 11.1% and chip equipment maker Lasertec Corp. lost 10%.

Japanese shares have been pummeled after the central bank raised its benchmark interest rate on Wednesday, to 0.25% from 0.1%. That pushed the value of the Japanese yen higher against the U.S. dollar, potentially hurting overseas earnings of major manufacturers and deflating a boom in tourism.

The dollar fell to 148.97 yen early Friday from 149.37 yen late Thursday. It had recently traded above 160 yen. The euro rose to $1.0800 from $1.0789.

Elsewhere in Asia on Friday, Hang Seng in Hong Kong dropped 2.5% to 16,877.97, while the Shanghai Composite index saw a more modest loss, of 0.7% to 2,913.04.

Chinese shares have extended losses as investors registered disappointment with the government’s latest efforts to spur growth through various piecemeal measures instead of the hoped-for infusions of broader stimulus.

The Kospi in Seoul dropped 3.6% to 2,675.56 and Taiwan’s Taiex sank 4.4%. Both markets tend to be hit hard by weakness in technology shares.

South Korea’s Samsung Electronics dropped 4.1% while another maker of computer chips and other components, SK Hynix, dropped 10.2%. Taiwan Semiconductor Manufacturing Co., the world’s largest chip maker, lost 5.9%.

Elsewhere in Asia, Australia’s S&P/ASX gave up 2.1% to 7,942.90 and the Sensex in India was down 0.8%. Bangkok’s SET fell 0.5%.

It has been a nerve wracking week for markets even as central banks in Japan, the United States and England followed through much as expected. Japan raised its benchmark, the Fed stood pat, and the Bank of England lowered its key rate by 0.25%, to 5%, its first cut in more than four years.

Commodity prices have also had a rough ride, with oil prices surging after the killings of leaders of Hamas and Hezbollah that fueled fears conflict in the Middle East might escalate into a wider war. But prices fell back Thursday and were only marginally higher early Friday.

Benchmark U.S. crude oil gained 54 cents to $76.85 per barrel. Brent crude, the international standard, was up 53 cents at $80.50 per barrel.

The price of gold, a traditional refuge for investors in uncertain times, surged to over $2,500 an ounce.

Meanwhile, other commodities sank on concerns that weakness in the U.S. and other major economies will hurt demand. The price of nickel dropped 2.4%, aluminum dropped 1% and copper was down 0.2%.

On Thursday, the S&P 500 sank 1.4% to 5,446.68 after a report showed U.S. manufacturing activity is still shrinking. The Dow Jones Industrial Average fell 1.2%, to 40,347.97, and the Nasdaq composite dropped 2.3% to 17,194.15. The small stocks in the Russell 2000 index dropped 3%.

Manufacturing has been one of areas of the economy hurt most by high interest rates, and the report from the Institute for Supply Management helped extinguish what had been gains for U.S. stock indexes early in the morning. Other reports Thursday showed the number of U.S. workers applying for jobless benefits hit its highest level in about a year and that productivity for U.S. workers improved during the spring.

Together, the data likely remove upward pressure on inflation and give more leeway for the Federal Reserve to cut interest rates. A day earlier, yields sank after Fed Chair Jerome Powell gave the clearest indication yet that inflation may have slowed enough for an easing of rates to begin in September.

Worry is mounting that the Fed may have its main interest rate at a two-decade high for too long in its zeal to stifle inflation by making it more costly to borrow. It could take months to a year for a rate cut to filter through the economy.

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AP Business Writer Stan Choe contributed.