Perfect storm looming large over global markets

SEOUL — The sharp drop in South Korean stocks Wednesday (September 4) demonstrated how quickly Wall Street’s sudden stumble is reverberating around the globe.

The KOSPI index plunged 3% out of the gate amid US recession fears — and the risk Friday’s employment report will validate them.

The fallout from the mini-crash of US tech giant Nvidia Corp, which suffered a record-setting US$279 billion stock market rout on Tuesday alone, also shook markets.

But this dynamic is just one of three imperiling global markets. The others are China’s slackening demand for raw materials and its impact on commodity prices and the specter of continued Bank of Japan rate hikes.

Talk about a “perfect storm” of risk bearing down on bourses everywhere.

This term is overused even by the standards of the most tired of cliches. But it fits in this case, though, as traders speculate what might trigger the next massive shock to global markets.

Might the US Federal Reserve’s September 17-18 policy meeting be the catalyst?

Given heightened concerns about the globe’s biggest economy, a tentative easing move by the Fed could leave markets disappointed and disoriented. Or might a buy-the-rumor-sell-the-fact vibe slam assets?

The fact that China, the world’s No 2 economy, is losing momentum hardly helps. This week brought news that the official manufacturing purchasing managers’ index contracted in August for a fourth straight month, despite Xi’s efforts to spur growth. It has now been below the 50-mark separating expansion and contraction in all but three months since April 2023.

“The challenges and difficulties in stabilizing growth over the coming months will be substantial,” says Wang Zhe, senior economist at Caixin Insight Group. “There is an