Macroeconomic Context

The global sell-off is partly influenced by macroeconomic news. For instance, South Korea’s GDP grew by 2.3% year-on-year in the second quarter, lower than the 2.5% expected by analysts. Similarly, Germany's business climate declined, contrary to expectations of an increase.

On the other hand, China’s central bank cut the medium-term lending facility rate to 2.3% from 2.5% to stimulate the economy, following a reduction in loan prime rates earlier in the week. This unexpected move has been interpreted as a negative signal about the trajectory of the world's second-largest economy.

Additionally, futures indicate a 100% chance that the Federal Reserve will decrease interest rates at its September meeting.

Source: Investing.com

Yen Strongest in 2.5 Months

The Yen surged 1.1% overnight, maintaining its upward momentum ahead of the Bank of Japan's meeting next week. Policymakers will discuss measures to combat the historically low value of Japan’s currency. The Yen reached a value of 152.28 against the dollar after appreciating for four consecutive days.

The Bank of Japan is expected to discuss a rate hike at its monetary policy meeting on July 30 and 31, along with plans to halve its bond-buying activities.

Asian Stock Market

Japan: The Nikkei closed at 37,869.51, its lowest level since April. The broader Topix index dropped 2.98% to 2,709.86, marking its largest single-day decline since February 2021. Nikkei heavyweights SoftBank Group plummeted 9.39%, and Nissan Motor plunged 11% after its quarterly profit slumped 99%.

South Korea: The Kospi index lost 1.74% to end at 2,710.65, while the Kosdaq index was down 2.08%. The decline was exacerbated by an 8.87% drop in tech giant SK Hynix, which fell despite posting record-high quarterly revenue. Losses in South Korea were also linked to the plunge in US tech stocks.

China: The Hong Kong Hang Seng index was down 1.67%, while China’s mainland index CSI 300 fell 0.55% to 3,399.27, its lowest level since February, amid macroeconomic concerns.

Australia: The S&P/ASX 200 dropped 1.29% to 7,861.2.

Taiwan: Markets were closed for a second day due to Typhoon Gaemi.