[S Fear Hits Global Economy] Major Stock Markets Falter... Nasdaq Enters Bear Market

[Image source=Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina, Reporters Park Byunghee, Moon Jewon] Global stock markets have plummeted amid fears of ‘stagflation.’ The fear has grown that the energy sanction card being toyed with by the West, including the United States, in an already severe inflation situation could lead to a stagflation shock. As risk-averse sentiment spreads, major stock markets including the Nasdaq have all sharply declined.

On the 7th (local time) at the New York Stock Exchange, the Dow Jones Industrial Average closed down 2.37% from the previous session, entering a ‘technical correction’ more than 10% below its previous high.

The S&P 500 and Nasdaq indices, which had entered correction territory earlier, also recorded losses of 2.95% and 3.62%, respectively. The Nasdaq index fell more than 20% from its previous high on the day, entering a ‘bear market.’ It is the first time since February 2020 that the Dow has entered a correction, and the first time since March 2020 that the Nasdaq has entered a bear market.

Major European stock markets also fell across the board. The German DAX index and Euro Stoxx 50 index closed down 1.98% and 1.25%, respectively, entering bear market territory. The French CAC 40 index also fell 1.31%, approaching bear market levels.

This is interpreted as a market suppression effect caused by concerns that soaring energy prices due to Russia’s invasion of Ukraine will trigger additional inflation and damage the economy. Kathy Bostanich, Chief U.S. Economist at Oxford Economics, evaluated, "This reflects concerns that the shock could transform from a simple inflation shock to a stagflation shock."

On the morning of the 8th, Asian stock markets such as Korea’s KOSPI and Japan’s Nikkei 225 also started lower. In the Seoul foreign exchange market that day, the exchange rate opened at 1,232.0 won, up 4.9 won from the previous trading day, and maintained an upward trend. The exchange rate rising to the 1,230 won level during the session is the first time in about 1 year and 9 months since the end of May 2020, right after the COVID-19 outbreak.

Commodity prices soared. Nickel prices surged as much as 90% intraday, marking the largest daily increase ever. LME aluminum prices reached a new all-time high of $4,073.5 per ton during the session. International oil prices, which had surged past $130 per barrel the previous day, somewhat calmed as Germany and others showed a lukewarm stance on energy sanctions, but upward pressure remains. Alexander Novak, Russian Deputy Prime Minister in charge of energy, warned that "prices above $300 per barrel are also possible" regarding Western energy sanctions.