The Crash on Wall Street Spills Over to Asian Markets

On Asian stock markets on Wednesday, stock prices sharply fell, particularly in the technology sector, mirroring the decline on Wall Street the day before, as investors fear that after a prolonged period of strong stock price growth, prices are too high. The MSCI Asia-Pacific index, excluding Japan, was down 1.2 percent around seven o’clock, having lost more than two percent in the last two days.

Stock prices in Australia, India, Hong Kong, Japan, and South Korea fell between 0.2 and 3.4 percent this morning. In Shanghai, however, they slightly increased. At the very beginning of today’s trading, the Japanese Nikkei index was down more than four percent, and the South Korean Kospi was down more than six percent.

Later, those losses were mitigated. However, after reaching record levels on Monday, these indices are under pressure for the second consecutive day. This is a consequence of investor concerns regarding valuations in the technology sector, which has been experiencing strong growth for some time due to the euphoria surrounding artificial intelligence development.

Sharp Decline on Wall Street

As a result, stock indices on Wall Street also sharply fell yesterday. The Dow Jones decreased by 0.53 percent, while the S&P 500 plunged 1.17 percent, and the Nasdaq index fell 2.04 percent.

Some analysts have been warning for some time about the high level of prices, especially in the technology sector, given that the bull market has lasted for more than three years, and recently the leaders of two powerful banks, Morgan Stanley and Goldman Sachs, expressed concerns about a potential market ‘bubble’.

– “It seems that today investors are a bit more concerned about valuations than usual. The valuations of many technology companies are quite stretched, and their earnings are good, but not impressive,” says Chuck Carlson, director at Horizon Investment Services.

Additionally, investors who were counting on further reductions in interest rates by the U.S. central bank are worried about uncertainty. The Fed reduced rates by 0.25 percentage points in September and October due to weakness in the labor market, but central bank president Jerome Powell warned last week that further cuts in December are not guaranteed.

As a result, in recent days, investors have been closely monitoring comments from central bank leaders. Some of them indicate that they are inclined to reduce rates at the December meeting, while others believe that inflation remains significantly above the Fed’s target levels and that it is necessary to wait for developments in the economy before further adjustments to monetary policy.

What the situation in the economy is remains a big question as there are no statistical reports, given that federal agencies have not been operational for some time. Republicans and Democrats still cannot agree on funding the operations of these agencies.

While some analysts believe that today’s price drop is merely a short-term correction ahead of a market rebound, others contend that a larger correction is yet to come.

Dollar Strongly Strengthened, Oil Prices Stagnate

In the currency markets, the value of the dollar against a basket of currencies has risen sharply, reaching its highest levels since August, as investors seek safer havens due to uncertainty in capital markets.

As a result, both the Swiss and Japanese currencies have strengthened.

The dollar index, which shows the value of the U.S. dollar against the other six major world currencies, is around 100.17 points this morning, compared to 99.99 points at the same time yesterday.

Meanwhile, the dollar’s exchange rate against the Japanese currency slipped from yesterday’s 153.75 to 153.45 yen.

However, the U.S. currency has strengthened against the European currency, causing the euro price to drop to 1.1490 dollars, the lowest level in seven months, while it was 1.1510 dollars at the same time yesterday.

Oil prices, on the other hand, are not experiencing significant changes. On the London market, the price of a barrel has increased by 0.09 percent to 64.50 dollars, while on the U.S. market, a barrel has risen by 0.05 percent to 60.60 dollars.