The US jobs report was 4 days ago and the market dropped a little bit. The Bank of Japan interest rate changed yesterday and the market dropped a lot. The article pointed out that the Japanese market almost crashed.
The carry trade was borrowing zero interest rate yen, then investing it in US stocks and other places. When Japan raised interest rates, investors sold their stocks, etc to cover. The other assets of carry trade also dropped at same time so not just US stocks.
The market may be weak, but the drop was from Japan.
The S&P dropped 2% on Thursday and 1.9% on Friday and 2.9% on Monday. Initial jobless claims report was Thursday, and the employment report plus unemployment data was Friday. Monday was a continuation of fears around the US economy because the US trading day started with Chicago’s fed reserve president saying that the jobs report was bad but that they are not going to react, at a time when many were calling for them to take emergency action. I agree that there are other factors like unwinding carry trades and global conflicts, but most news articles seem to say Monday’s drop was due to fears of a US recession.
The S&P 500 dropped 5% overnight between Friday and Monday, starting on Sunday night when Japan made their announcement. It went up on Monday from the bottom which is why the daily percentage is smaller. It has bounced most of the way back. Which is what you would expect from flash crash.
The carry trade was borrowing zero interest rate yen, then investing it in US stocks and other places. When Japan raised interest rates, investors sold their stocks, etc to cover. The other assets of carry trade also dropped at same time so not just US stocks.
The market may be weak, but the drop was from Japan.