The decline was fueled by fears of a US recession, a scenario that investors had long since shelved. The violence of this shift from a "blue sky" hypothesis to a gloomy economic vision is astonishing, even if a few signals had appeared here and there in recent weeks.

Crash-like variations

In Tokyo, the Nikkei index plunged 12.4%, its biggest daily percentage fall since "Black Monday" on October 20, 1987, according to LSEG data. The Taiwan Stock Exchange fell by 8.4%, its biggest single-session decline since November 20, 2000.

Topix

The Topix stall, after several already difficult sessions

In South Korea, the Kospi index lost almost 10%, its biggest fall since October 2008. The plunge was so severe that it triggered a trading restriction for the first time in four years. India and Australia lost 2 to 4%, while China, often bucking the trend, limited its losses following the announcement of a consumer aid plan.

Fear of recession not unexpected

The following chart shows fund managers' expectations regarding the likelihood of a U.S. recession over the next 18 months, according to a survey conducted by BofA Global Research in July. The data are spread over three months: May 2024, June 2024, and July 2024. The graph shows that 46% of managers do not expect a recession in the next 18 months, but that this percentage is down on the two previous surveys.

BOFA

However, the risk of recession was not the main fear of specialists in BofA's July survey. In the July BofA survey, 18% of managers cited recession as the number one risk, behind accelerating inflation (22%) and geopolitical conflict (26%).