Another Black Day on Monday, global financial markets experienced a dramatic collapse reminiscent of previous major downturns such as Black Monday in 1987, the 2008 financial crisis, and the COVID-19 pandemic in 2020. The market turmoil was driven by a combination of risk aversion, swift unwinding of yen carry trades, and mounting concerns about a potential US recession.

What Happened on Monday?

Global Stock Markets

• Nikkei 225: The Japanese index plunged by 12.4%, marking its largest one-day loss since 1987. It reached a 10-month low at 31,156 points.
• Dow Jones Stoxx Europe 600: Fell by 2.2%, hitting a seven-month low and continuing a trend of significant daily losses.
• US Stock Indices:
  • Dow Jones Industrial Average: Dropped by 2.6%, or 1,034 points, to 38,703, hitting a two-month low.
  • S&P 500: Slid 3.0%, or 160 points, to 5,186, reaching a three-month low.
  • NASDAQ Composite: Lost 3.0%, or 545 points, to 17,895, also hitting a three-month low. This marked the worst session on Wall Street since September 13, 2022, and was the third consecutive daily loss for these indices.

Mineral Markets

• Gold: Prices fell by 1.35%, reaching a two-week low at $2,364 per ounce.
• Silver: Dropped by 4.6%, hitting a three-month low at $26.94 per ounce.

Cryptocurrency Market

Despite positive developments such as the launch of Ethereum exchange-traded funds and support from Republican presidential candidate Donald Trump, the cryptocurrency market was not immune to the broader selloff:

• Bitcoin: Fell by 7% to $49,577, marking a six-month low.

Causes Behind the Collapse

1. Unwinding of Yen Carry Trades: The rapid unwinding of yen carry trades played a significant role in the market turmoil. This occurred after the Bank of Japan raised interest rates to their highest levels since 2008. The unwinding led to a massive selloff of high-risk assets funded by these trades.
2. Concerns About a US Recession: Weak economic data from the United States heightened fears that the economy might be heading into a recession faster than expected. This concern was exacerbated by a disappointing jobs report and rising unemployment, which increased worries about potential delays in Federal Reserve rate cuts.
3. Risk Aversion and Market Jitters: There was a broad rush to exit high-risk assets, as investors sought to mitigate exposure amid growing uncertainty about the global economic outlook. The selloff was compounded by jittery market behavior and a general aversion to risk.

Conclusion

Another Black Day on Monday’s market collapse was driven by a confluence of factors
including the rapid unwinding of yen carry trades, fears of a US recession
and widespread risk aversion. The resulting selloff affected global stock markets, commodities, and cryptocurrencies, reflecting the intense volatility and uncertainty gripping financial markets. As investors continue to react to these developments
the situation remains fluid, with ongoing adjustments expected as new economic data and central bank policies emerge.