[S Fear Hits Global Economy] Nasdaq and Others Enter 'Bear Market'... Uncertainty Grows Larger

[Asia Economy New York=Special Correspondent Joselgina, Reporter Park Byunghee] "It has become difficult to predict where the Ukraine crisis will head."

Anxiety quickly turned into fear. As Russia's invasion of Ukraine entered an unpredictable state due to additional economic sanctions from major countries, the global financial market also seems to have fallen into turmoil. The long-standing weakness in the stock market since the end of last year, attributed to the U.S. Federal Reserve's (Fed) tightening stance, has been compounded by the prolonged Ukraine crisis. There are even forecasts that the Nasdaq index, centered on tech stocks, will enter a bear market one after another.

◇Entering Bear Markets One After Another... Stagflation Fear Sweeps the Market

On the 7th (local time), the Nasdaq index's entry into a bear market in the U.S. New York stock market was virtually a foreseen step. It has been continuously declining, plunging nearly 18% just this year. Since entering a technical correction market on January 19, the Nasdaq index had been increasing its daily losses, and on this day, it closed more than 20% below the high point of last November, officially entering a bear market.

On the same day, the Dow Jones Industrial Average also entered a correction market, falling 10% below its previous high. It is the first time since February 2020 that the Dow has entered a correction market, and the first time since March 2020 that the Nasdaq has entered a bear market. The Dow, composed mainly of blue-chip stocks, and the large-cap S&P 500 index have fallen 9.69% and 11.86%, respectively, since the beginning of this year.

It is not only the New York stock market. Major European stock markets, including Germany's DAX index and the Euro Stoxx 50 index, have also entered bear markets. The French CAC 40 index briefly entered a bear market during the session but managed to exit it by the close.

The background to the global stock markets simultaneously facing a "Black Monday" is the fear of "stagflation." Investor sentiment, already frozen by the prolonged Ukraine crisis, was further dampened as the U.S. signaled its intention to sanction Russian oil. The soaring energy prices have triggered inflation and raised concerns about economic damage, acting as a negative factor. However, European stock markets saw smaller declines than New York's, partly because Germany, a key pillar of the European Union (EU) economy, opposed sanctions on Russian energy.

Edward Moya, chief analyst at OANDA, analyzed in an investor note, "With the uncertainty in Ukraine continuing, soaring commodity prices have added to concerns about economic growth prospects, causing stock markets to fall." Hans Olson, chief investment officer at Fiduciary Trust, said, "The market is in a very unstable situation. Considering the current rapid price increases and inflation, it is a combination that makes it difficult for the stock market to maintain its value."

◇Growing Uncertainty: "World War III Has Already Begun"

If additional sanctions cause energy and commodity prices to rise further, uncertainty surrounding the global financial market and the real economy is expected to increase significantly. The Joe Biden administration in the U.S. is reportedly considering independently banning imports of Russian oil, ahead of some European countries' lukewarm attitudes.

UBS Global Asset Management downgraded its investment outlook for global and Eurozone stock markets to neutral on the same day. UBS cited increased uncertainty due to the Ukraine war, the possibility of additional sanctions on Russia, soaring commodity prices, and central bank tightening policies as reasons for the downgrade.

In particular, unlike in the past, the high level of sanctions imposed by Western countries is expected to have considerable ripple effects. Oxford Analytica evaluated, "In the coming months, rising energy and commodity prices will exert broad inflationary pressures from essentials to industrial goods." JP Morgan forecasted that if the U.S. and Europe block Russian oil exports, global GDP could drop by 3 percentage points.

These inflation and recession concerns are expected to increase volatility in financial markets. Bill Ackman, CEO of Pershing Square Capital and a billionaire hedge fund magnate representing Wall Street, warned on Twitter, "World War III has already begun."

Meanwhile, Russia designated countries participating in sanctions against it, including the U.S. and EU, as unfriendly nations and decided to repay debts to creditors from these countries in rubles. Although aimed at financial stability, the market interprets this move as indicating a higher possibility of Russia defaulting on its debt.