Japan’s Nikkei 225 stock index started the week down 12.4%, continuing the sell-off that has rocked global markets as investors fretted over the state of the US economy.

The Nikkei closed down 4,451.28 points at 31,458.42. The broader TOPIX index fell 12.8% as selling intensified in the afternoon.

Earlier on Monday, the S&P 500 Index fell 2.4% and the Dow Jones Industrial Average fell 2.6%, turning the trading outlook on Wall Street negative.

The report, which showed that hiring by US employers slowed much more than expected last month, according to AP, shook financial markets and destroyed the euphoria that had lifted the Nikkei to an all-time high above 42,000 in recent weeks.

The Nikkei 225 fell 5.8 per cent on Friday, its worst two-day drop ever. Its worst one-day drop was on 20 October 1987, the so-called “Black Monday”, when it fell 3,836 points, or 14.9%. That Monday was grim enough, with the benchmark falling as much as 13.4% at one point.

Tokyo stocks have been falling since the Bank of Japan (BoJ) raised its key interest rate on Wednesday. The Nikkei is currently down 3.8% year-on-year.

One of the factors that prompted the BoJ to raise rates was the ongoing weakness of the Japanese yen, which has pushed inflation above the central bank’s 2% target. Early on Monday, the dollar fell to 142.59 yen from 146.45 at the end of Friday, well below levels of over 160 yen a few weeks ago. The euro also fell from $1.0923 to $1.0914.

Stocks hit highs earlier this year on the back of developments in artificial intelligence.

The recent sell-off has also hit markets dominated by computer chip makers such as Samsung Electronics and other technology stocks: South Korea’s Kospi fell more than 9 per cent on Monday as Samsung’s shares fell 11.6 per cent. The Kospi closed down 8.8 per cent at 2,441.55.Taiwan’s Taiex also lost 8.4 per cent as the world’s biggest chipmaker Taiwan Semiconductor Manufacturing Co. fell 9.8 per cent.

Hong Kong’s Hang Seng index lost 2.2% to 16,579.97 and Australia’s S&P/ASX 200 index fell 3.7% to 7,649.60.

Double whammy on Borsa Istanbul

The Shanghai Composite Index, which has been somewhat isolated from other world markets by capital controls, initially rose but then fell 1.5 per cent to 2,862.56.

The S&P 500’s 1.8 per cent drop on Friday was the first consecutive loss of at least 1 per cent since April. The Dow Jones Industrial Average fell 1.5 per cent and the Nasdaq Composite Index fell 2.4 per cent, 10 per cent below the record it set last month. Investors call a decline at these levels a “correction”.

On the Borsa Istanbul, the circuit breaker system connected to the index was activated at 09:55:22 following a 6.72 per cent drop in the morning. Then, as the decline in the index deepened, the circuit breaker was activated for the second time. The BIST 100 index fell below the critical 10,000 points.

Stocks fell sharply on Friday after weaker-than-expected US payrolls data fueled fears that high interest rates to curb inflation could drag the US economy into recession.

The VIX, an index that measures how worried investors are about an impending drop in the S&P 500, jumped nearly 26% early on Monday. Eventually, the VIX rose to 34. The VIX, which is considered Wall Street’s “fear indicator”, last reached this level in June 2020. Bitcoin, which recently soared to nearly $70,000, fell 14 per cent to $54,155.

Oil prices also fell, with US benchmark crude down 74 cents to $72.78 a barrel. Brent crude, the international standard, lost 67 cents to $76.14 a barrel.

Artificial intelligence stocks plunge

Artificial intelligence stocks fell as much as 9.6%, with Apple down 6.1%. Microsoft, Meta and Tesla also lost more than 5%.

While the largest US companies fell on Tradegate in Germany, Nvidia led the “Magnificent Seven” group in the decline of US stock index futures.

Nvidia fell as much as 17% on Tradegate, while Apple fell 10%, Microsoft 9%, Alphabet 9.6%, Amazon 9.3%, Meta 10% and Tesla 10%.

According to Bloomberg, these moves are a sign that “the air is coming out of the equity markets, driven by big gains in a small number of stocks”.

It notes that if confidence in the AI trade continues to fall on weak earnings and the US economy really takes a hit, there could be more losses to come.

However, it points out that a “window of opportunity” could open for investors, especially if central banks take action to cut interest rates, which could support sectors that benefit from low borrowing costs.

Goldman Sachs: A healthy correction

In a report, IG’s Yeap Jun Rong said investors will be watching data on the US services sector from the Institute for Supply Management on Monday, which could help determine whether the global sell-off was an overreaction.

The global rout began just days after US stock indexes had their best day in months after Federal Reserve Chairman Jerome Powell gave the clearest sign yet that inflation is slowing enough to start cutting interest rates in September.

Now there are growing concerns that the Fed may have increased the risk of recession in the world’s largest economy by keeping its key interest rate at a two-decade high for too long.

On the other hand, Christian Mueller-Glissmann of Goldman Sachs told Bloomberg that the market situation shows a “somewhat healthy correction”. He also argued that while the weakness in US data was a surprise, Goldman Sachs economists were “not that worried”.

Bets on an immediate rate cut: Will the Fed cut in a week?

The market turmoil is fuelling bets on an immediate policy response from the Fed.

Investors are currently pricing in a 60% chance of a 25bp cut within a week.

Given that the central bank announced its last decision just a few days ago, this is seen as a real sign of concern.

The United States on Thursday (1 August) recognised Venezuelan President Nicolás Maduro’s rival and opposition candidate Edmundo González Urrutia as the winner of Venezuela’s presidential election, rejecting Maduro’s claim of victory.

“Given the overwhelming evidence, it is clear to the United States, and most importantly to the people of Venezuela, that Edmundo González Urrutia received the most votes in Venezuela’s July 28 presidential election,” US Secretary of State Antony Blinken said on Thursday.

Blinken stopped short of threatening new sanctions against Venezuela, but hinted at possible “punitive measures”. Reuters reported on Tuesday that Washington was considering new sanctions following the disputed election.

“We fully support the process of restoring democratic norms in Venezuela and stand ready to consider ways to support that process with our international partners,” Blinken said.

Blinken also called for the protection and safety of opposition leaders. “Law enforcement and security forces must not become instruments of political violence used against citizens exercising their democratic rights,” the US secretary said.

Opposition calls for nationwide protests

Venezuelan opposition leader Maria Corina Machado on Thursday called for protests in every city in the country on Saturday.

“We must be strong, organised and mobilised with the pride of having won a historic victory on July 28 and the knowledge that we will go all the way to victory,” Machado said on social media.

Writing in the Wall Street Journal yesterday, Machado said he had gone into hiding after Maduro’s victory and “feared for my life”.

Tensions rise with South American countries

Regional disputes are escalating as Venezuela has withdrawn diplomats from eight critical Latin American countries and asked their ambassadors to leave their territory.

Chile, Costa Rica, Panama, the Dominican Republic and Uruguay are among the countries that have cut diplomatic ties.

Argentine President Javier Milei said his country’s diplomatic staff would leave Venezuela on Thursday and thanked Brazil for securing its embassy.

Six Venezuelan opposition figures are currently sheltered in the Argentine embassy.

The Brazilian foreign ministry also announced that Peru had taken over its representation in Venezuela.

Peru’s recognition of González Urrutia as Venezuela’s legitimate leader on Tuesday prompted Caracas to break off diplomatic relations.

Joint statement from Brazil, Colombia and Mexico

The leaders of Brazil, Mexico and Colombia have called on Venezuela to release detailed election results amid disagreement over the outcome.

In a joint statement, the three countries called for an “impartial verification” of the results and urged Caracas to publish voting data by precinct.

“We call on the electoral authorities in Venezuela to act as soon as possible and allow the public release of the election results,” said a joint statement issued after a telephone call between the presidents of Brazil, Mexico and Colombia, Luiz Inacio Lula da Silva, Andres Manuel Lopez Obrador and Gustavo Petro.

The three countries reaffirmed their willingness to support efforts at dialogue and the search for an agreement that would benefit the Venezuelan people.

According to Reuters, the opposition has published detailed tallies on a public website, but the government has not yet released any information beyond a national vote total for each candidate.

After President Nicolas Maduro was declared elected for the third time in Venezuela, the countries of the Americas were divided over the results.

While Latin American countries led by Argentina and Chile officially claimed that Maduro had ‘stolen the election’, countries such as Cuba and Nicaragua were quick to congratulate the Venezuelan leader on his victory.

This is not surprising, since it is no secret that Argentine leader Javier Milei has been speaking out against Maduro and Bolivarian Venezuela for months, as has the Cuban leadership’s support for Maduro.

What is surprising is that three countries known for their ‘left’ governments have still not recognised Maduro’s victory: Lula’s Brazil, Obrador’s Mexico and Petro’s Colombia.

Three countries are preparing a statement on the ‘lack of transparency’ of the elections

According to Bloomberg, Brazil is in talks with Mexico and Colombia to issue a joint statement demanding that Venezuela count all the votes and publish the results from each electoral district.

The foreign ministries of the three countries, led by leftist presidents with historically close ties to Venezuela’s Nicolas Maduro, refused on Monday to recognise the outcome of Sunday’s election until Caracas takes steps to ensure the transparency of the process.

President Luiz Inacio Lula da Silva is unhappy with the situation in Venezuela and believes that Maduro ‘systematically failed to fulfil his promises of transparency’ during the electoral process, officials told Bloomberg.

To underline its dissatisfaction, Brazil’s foreign ministry instructed the country’s ambassador in Caracas not to attend Monday’s ceremony organised by Venezuela’s electoral authority to certify the results.

Brazil and Colombia have been criticising the ‘election’ for months

Lula said last week that Maduro should learn that ‘when you lose an election, you have to go away and prepare for another one’.

Lula also warned that Venezuela’s economic future ‘depends on a clean election, recognised as legitimate by the international community’.

In March, Colombia and Brazil took the unusual step of criticising Venezuela after some members of the Venezuelan opposition said they had been prevented from registering as candidates for the 28 July elections.

In a statement at the time, Colombia’s foreign ministry warned the Maduro government that preventing opposition candidates from taking part in the vote could ‘undermine the confidence of the international community’.

Brazil’s foreign ministry also said it was following the process ‘with concern’, especially as Venezuela had yet to issue a statement on the blocking.

Both countries argued that the opposition’s problems had raised ‘concerns about free and fair elections.

In separate statements, Venezuelan Foreign Minister Yvan Gil accused Colombia and Brazil of interfering in his country’s internal affairs.

Opposition: We have proof we defeated Maduro

Venezuela’s opposition says it has proof that rival Edmundo González defeated Maduro in the presidential election.

González and opposition leader Maria Corina Machado told reporters on Monday that they had received more than 70 per cent of the vote tallies, which show that González received more than 6 million votes, compared with more than 2 million for Maduro.

González and Machado made their claims hours after Venezuela’s Maduro-controlled electoral council announced that the president had won the election with 51 per cent of the vote to González’s 44 per cent.

According to the opposition, the results did not include vote counts from individual polling stations, which election observers said were crucial to determining the accuracy of the vote count.

Opposition also takes to the streets

The announcement of Maduro’s victory just after midnight on Monday sparked angry protests in the capital Caracas and across Venezuela, with people banging pots and pans throughout the night and into the late morning.

Demonstrators clashed with police, who fired tear gas to disperse the crowds. At least one person was killed in the northern province of Yaracuy, according to Voice of America.

Machado called on opposition supporters to organise demonstrations in Caracas on Tuesday.

US ‘concerned’, Biden to meet Lula

We have serious concerns that the announced result does not reflect the will or the votes of the Venezuelan people,’ said US Secretary of State Antony Blinken.

On the other hand, the Biden administration said on Monday that ‘electoral manipulation’ had destroyed ‘any credibility’ of Venezuelan President Nicolas Maduro’s claim of re-election victory, leaving the door open to new sanctions against the country, Reuters reported.

US officials, speaking on condition of anonymity, said senior aides to President Joe Biden had demanded that Maduro release a detailed breakdown of the vote and that failure to do so would make the international community reluctant to accept the announced result.

The officials did not announce any new “punitive measures” but said Washington would review its sanctions policy against Caracas based on Maduro’s future actions.

“We may be facing a new scenario. We will take that into account as we look at where we can go with sanctions against Venezuela,” one official said.

They argued that the Maduro government had resorted to ‘repression and electoral manipulation’ and said that ‘any credibility of the so-called election results has been destroyed’.

A senior US official said the administration was in contact with Brazil and other Latin American governments about the political situation in Venezuela.

Biden will meet with Brazilian President Lula on Tuesday afternoon, the White House said in a statement.

EU officials meet to discuss Venezuela election

European diplomats will discuss Maduro’s victory in Venezuela’s presidential election today (30 July).

The Council of Europe’s working group on Latin America and the Caribbean will meet at 10.00 Brussels time.

Josep Borrell, the European Union’s top diplomat, wrote in a message on X: ‘The Venezuelan people voted peacefully and in large numbers for the future of their country. Their will must be respected,’ he said.

Borrell added that it was vital to ensure ‘full transparency in the electoral process’, including a detailed vote count and access to voting records at polling stations.

Simon Stano, spokesman for the EU’s diplomatic service, said: ‘We are assessing the election process and results in close contact with national, regional and international actors on the ground. However, we are concerned by allegations of flaws and shortcomings,’ said Simon Stano, spokesperson for the EU diplomatic service.

Elon Musk calls Maduro a ‘dictator’, Maduro responds

Following the presidential election in Venezuela, which saw Maduro and his allies triumph, X owner Elon Musk took to social media to accuse the Venezuelan leader of committing ‘massive electoral fraud’.

Shame on dictator Maduro,” Musk said on Monday.

Musk also retweeted a comment on X from Argentine President Javier Milei, whom he described as his ‘friend’. ‘The numbers have declared the victory of an overwhelming opposition and the world expects the government to concede defeat after years of socialism, misery, collapse and death,’ Milei had said.

Maduro responded by calling Musk ‘the arch-enemy of peace in Venezuela’.

Arguing that Elon Musk was ‘the representative of a fascist ideology, unnatural, anti-society’, Maduro said: ‘Elon Musk is desperate; control yourself. Whoever fights with me will dry up,” he replied, ‘You want to fight? Let’s do it. Elon Musk, I am ready. I’m not afraid of you, Elon Musk. Let’s fight wherever you want,” Maduro said, accusing Musk of wanting to “come with his rockets and his army and invade Venezuela’.